Single Touch Payroll Phase 2: What Every Business Needs to Know

"Single Touch Payroll Phase 2" - words that are likely to make your eyes glaze over as your brain decides the phrase sounds boring and absolutely not fun. Nevertheless, STP 2 is extremely important and also mandatory for ALL businesses, so let's make sure you are across what it means and what you need to do, so we can get back to the things that bring you joy as a business leader!

The What, Why, Who and When of STP 2

Single Touch Payroll Phase 2 expands the Australian Tax Office's payroll reporting system, which means employers must report additional information to the ATO and clarify payments made to employees. Key to STP 2 is the sharing of payroll data with multiple government departments, including Services Australia and the Child Support Agency. By streamlining the information through the payroll system, STP 2 reduces the administrative burden on employers.

STP 2 is mandatory for all businesses. It is not optional.

STP 2 went live on 1 January 2022, and all major software providers have long since completed their rollout. If you are setting up payroll for a new business, or you have switched to a new system, make sure you enable and configure STP 2 reporting correctly from the outset.If you are unsure whether your current setup is compliant, check with your provider.

What You Will Need to Report

For many, you used to report a single gross amount, however STP 2 requires employers to separately report the following:

• gross
• paid leave
• allowances
• overtime
• bonuses and commissions
• directors' fees
• lump sum - Return to Work
• salary sacrifice.

This breakdown of amounts is referred to as "disaggregation of gross" and must occur to remain compliant. For more detailed information from the ATO, CLICK HERE.

It is important to note that while many employers have an all-inclusive rate of payment that includes allowances such as the Industry Allowance or Tool Allowance, you need to break this down and report each element separately for every employee individually.

We highly recommend you speak with your accountant or bookkeeper to be certain your payroll setup and reporting is established correctly and complies with ATO requirements. You should also communicate with your employees about the changes they will see on their pay slips.

One More Thing... Big Changes Coming with Payday Super

The biggest change on the horizon is Payday Super. From 1 July 2026, you can no longer remit superannuation each quarter. Instead, super contributions must be received by the employee's super fund within seven business days of each payday. The Superannuation Guarantee rate remains at 12%. Now is the time to talk to your accountant or bookkeeper about getting your cash flow and payroll processes ready.

And it does not stop there. New Award rates also apply from the first pay cycle from 1 July 2026, with the National Minimum Wage rising 5.97% and minimum rates in modern awards increasing by 4.75%. There are important changes to the lowest-paid award classifications too, with the C13 classification being phased out over the next three years.

We have covered all of this in detail, including what the Award classification changes mean for your team, in our full guide: Award Rate Increases, Award Classification Changes and Payday Super: What Employers Need to Know from 1 July 2026.

Please contact the HR Staff n' Stuff team if you need further assistance.

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