If you run a small business in Australia and pay even one employee, you are already legally required to report payroll data to the ATO every single payday. That's STP — Single Touch Payroll — and its expanded version, Phase 2, has been mandatory for all employers since 2022. Yet we still see small business owners who think filing an end-of-year payment summary covers it, or who don't realise their payslips need to reflect every field they're reporting to the ATO. It doesn't work that way.
- STP Phase 2 is mandatory for every Australian employer — including those with just one or two staff.
- Every pay event must be reported to the ATO on or before the payment date — not monthly, not quarterly.
- STP does not replace your obligation to issue a payslip under the Fair Work Act — you must do both.
- Super is 12% of OTE for 2025/26 and must appear on the payslip as a dollar amount, not just a rate.
- End-of-year STP finalisation is due by 14 July 2026.
What Is Single Touch Payroll — and Why Micro Employers Can't Ignore It
Single Touch Payroll is the ATO's system for receiving payroll data in real time. Each time you pay staff, your payroll software (or payslip tool) sends a report directly to the ATO covering wages, PAYG withholding, and superannuation entitlements. No more annual payment summaries — the ATO sees your payroll as it happens.
STP Phase 2 — mandatory since 1 January 2022 for most employers, with some deferrals extending into 2023 — went further. Phase 2 requires you to report employment type (full-time, part-time, casual), income types (salary, allowances, lump sums, commissions), and child support deductions. The ATO uses this data to pre-fill tax returns and monitor compliance across the system.
Critically, there is no minimum headcount threshold. Even micro employers with one to four employees are fully subject to STP Phase 2. The ATO does offer a 28-day deferral window for small employers who miss a lodgement — but you must apply for it. It is not automatic.
“"Every pay event must be reported to the ATO on or before the payment date — not at the end of the month, not at the end of the quarter."
Take Jason, a Melbourne café owner with three casual staff. He assumed his accountant handled STP at year-end. In reality, every fortnightly pay run should have triggered an STP submission. When the ATO flagged the gap, Jason faced potential failure-to-lodge penalties and had to backfill several months of data. Don't be Jason.
What Must Appear on Payslips When STP Phase 2 Is Active
Here's the thing many employers get wrong: STP reporting to the ATO does not replace your obligation to issue a payslip. These are two separate legal requirements. The Fair Work Act requires you to give each employee a payslip within one working day of their pay date — and that payslip must contain specific fields. Our full breakdown of Fair Work payslip requirements covers the complete list.
Under STP Phase 2, the fields you report to the ATO should also be visible on the payslip you hand the employee. Here's how they map:
| STP Phase 2 Field | Must Show on Payslip? |
|---|---|
| Employer ABN | ✅ Yes — mandatory under Fair Work Act |
| Employee name and payroll ID | ✅ Yes |
| Pay period dates | ✅ Yes |
| Gross and net pay | ✅ Yes — both figures required |
| PAYG withholding amount | ✅ Yes — dollar amount, not just rate |
| Superannuation entitlement (12% SGC) | ✅ Yes — show dollar amount contributed |
| Ordinary Time Earnings (OTE) for super | ✅ Recommended — clarifies super calculation base |
| Allowances (e.g. tool, travel, overtime) | ✅ Yes — itemised under Phase 2 income types |
| Child support deductions | ✅ Yes — if applicable |
| Employment type (full-time/part-time/casual) | Reported to ATO — good practice to include on payslip |
For PAYG withholding specifically, the ATO publishes updated tax tables each financial year. Make sure you're applying the correct 2025–26 rates — our PAYG withholding guide walks through how to calculate the right amount based on pay frequency and tax file number status.
STP Compliance Checklist for Small Employers (2025/26)
Honestly, most of this isn't complicated — it's just easy to let slip when you're running a small business and payroll isn't your day job. Work through these six steps every pay cycle.
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1
Use STP Phase 2-enabled software or a compliant payslip tool. Not every cheap payslip template online submits data to the ATO. Check that your tool is on the ATO's list of STP-enabled products or generates payslips with all Phase 2 fields ready for manual STP lodgement.
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2
Report each pay event to the ATO on or before the payment date. This is the most common slip-up. The submission must be made before — not after — funds hit your employees' accounts.
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3
Apply correct PAYG withholding using ATO 2025–26 tax tables. Withholding rates changed at the start of the financial year. Using last year's tables means under-withholding — which creates problems for both you and your employee at tax time.
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4
Confirm super is calculated at 12% on OTE. The Super Guarantee rate is 12% for 2025/26 — up from 11.5% the year before. It applies to ordinary time earnings, not overtime. Our superannuation guide for 2026 covers exactly what's included in OTE and what isn't.
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5
Issue a payslip to each employee within one working day of their pay date. This is a separate obligation under the Fair Work Act. Failing to issue a payslip is a breach — even if your STP submission was perfect.
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6
Finalise STP data by 14 July 2026. End-of-year finalisation replaces the old payment summary process. You must mark all employees' income statements as "Tax ready" in your STP software by 14 July so they can lodge their tax returns.
Penalty for non-compliance: the ATO can issue failure-to-lodge penalties starting at $313 per missed lodgement for small entities (per ATO penalty units as of 2025/26). Small employers do get a 28-day deferral window — but you must apply for it proactively. It is not granted automatically.
Employees can view their year-to-date income tax and super data through myGov at any time because of STP. If what they see in myGov doesn't match their payslips, they will notice — and so will the ATO. Accurate payslips aren't just a legal requirement; they're your first line of defence against disputes.
Need a compliant Australian payslip right now?
Generate a Compliant Payslip NowSTP Phase 2 means every small business must report payroll data to the ATO each payday AND still issue a Fair Work-compliant payslip to each employee — these are two separate obligations that run in parallel. PayslipMate generates STP-aligned Australian payslips with PAYG withholding calculated at 2025–26 rates, super shown at 12% as a dollar amount, employer ABN, and all Fair Work-required fields pre-filled. No ongoing payroll software subscription required — generate only what you need.
Frequently Asked Questions
Does STP replace the need to give employees a payslip in Australia?
No. STP reporting goes to the ATO — it does not count as issuing a payslip to your employee. Under the Fair Work Act, you must still provide each employee with a payslip within one working day of each pay period, containing all required fields. These are two completely separate obligations.
What is the superannuation rate for 2025/26 under STP Phase 2?
The Super Guarantee rate for 2025/26 is 12% of ordinary time earnings — up from 11.5% the previous year. This rate must be reported to the ATO via STP and shown on the employee's payslip as the actual dollar amount contributed, not just the percentage.
Can a small business use PayslipMate to meet STP Phase 2 payslip obligations?
Yes. PayslipMate generates compliant Australian payslips with all STP Phase 2 fields — PAYG withholding at current ATO rates, super contributions at 12%, employment type, income type, and employer ABN — ready to issue to employees. It's designed specifically for small businesses that don't need a full payroll software subscription.
What happens if I miss an STP lodgement as a small employer?
The ATO can issue failure-to-lodge penalties, though small employers are generally offered a 28-day deferral window if they apply. Repeat or prolonged non-lodgement carries escalating penalties. The safest approach is to report on or before each payday without exception.
Do allowances need to appear separately on a payslip under STP Phase 2?
Yes. STP Phase 2 requires allowances to be reported to the ATO by type (tool allowance, travel allowance, etc.) rather than bundled into gross pay. Your payslips should reflect this same itemisation so employees can reconcile what they see in myGov with what they've received.
STP Phase 2 simplified the ATO's view of your payroll — but it added more fields, more granularity, and more ways to get things wrong at the payslip level. The good news: once your payslip template is set up correctly with all required fields, compliance becomes routine. If you haven't checked your current payslips against the Phase 2 requirements, now — before 14 July 2026 finalisation — is the right time.
Shawn Martinez, CPA
Senior Tax Accountant
Shawn Martinez is a Certified Public Accountant with over 12 years of experience in Australian taxation and payroll compliance. He specializes in PAYG withholding, superannuation regulations, and ATO compliance for small to medium businesses.
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