Media: Employers: resources to help you meet your obligations
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Single Touch Payroll
Each time you pay your employees, you'll need to report their tax and super information to us through Single Touch Payroll (STP) enabled payroll software.
The includes:
- salaries and wages
- amounts withheld
- super guarantee liability information.
STP was expanded from 1 January 2022. Unless your digital service provider has informed you they've been granted a deferral or you've applied to us for a delayed transition, you should be reporting expanded information through STP Phase 2 enabled software. For more information, see Employer STP Phase 2 checklist.
By 14 July each year, you'll also need to check your information is correct and make an end-of-year finalisation declaration through STP. This is important so your employees can access their information to complete their income tax return.
How you report your payroll information to the ATO depends on your situation and the payroll software you use. Our STP Get ready checklist will guide you through the steps so you'll be ready to start reporting to help you send your first STP report to us successfully.
Be aware that even if you report PAYG withholding through STP, you still need to report the same amounts on your activity statements and pay the amount owed.
Small employers – closely held (related) employees
If you are a small employer (19 or fewer employees) with closely held (related) employees you can choose to report in any of the following ways:
- actual amounts paid to closely held employees on or before the date of payment
- actual payments made to closely held payees quarterly
- a reasonable estimate of the amounts quarterly.
You must still report the amounts paid to other employees (also known as arm's length employees) on or before each payday.
If you have both closely held and arm's length employees you'll need to make an end-of-year finalisation declaration through STP:
- by 14 July for your arm's length employees
- by 30 September for closely held employees.
If you only have closely held payees, you have until the due date of the closely held payee’s individual income tax return to make a finalisation declaration for a closely held payee. This is usually 31 October.
Worker classification
When hiring a worker, you must determine if they are an Employee or independent contractor.
It's important because:
- it affects your tax (PAYG withholding), super and other obligations
- penalties and charges may apply if you get it wrong.
Independent contractors working for you
If your worker is an independent contractor, you'll have different obligations than if they were an employee.
You must:
- withhold tax from payments you make to independent contractors if they either
- don't quote their ABN to you
- have a voluntary agreement with you to withhold tax from their payments.
- pay super guarantee for independent contractors if they meet the extended definition of 'employee'. For these independent contractors, even if they provide you with their ABN, you will need to pay super guarantee.
Independent contractors and end of financial year
If you withhold tax from payments to independent contractors because they didn't quote their ABN to you, at the end of the financial year you'll need to:
- advise them of the amount you withheld by completing a PAYG payment summary – withholding where ABN not quoted form by 14 July
- include the payments in your PAYG withholding where ABN not quoted – annual report and lodge the report with us by 31 October.
If you withhold tax from payments to independent contractors because they have a voluntary agreement to withhold tax, you can voluntarily report those payments through STP.
If you choose not to report those payments through STP, at the end of the financial year you'll need to:
- advise them of the amount you withheld by completing a PAYG payment summary - business and personal services income form by 14 July
- include the payments in your PAYG withholding payment summary annual report and lodge the report with us by 14 August.
If your worker is an independent contractor, you may also need to lodge a taxable payments annual report (TPAR) each year. This report details the payments you've made to them for their services.
Australian residents who work overseas
If you employ Australian residents who work overseas continuously for 91 days or more, you need to understand your specific tax or super obligations for them. Learn more about Employing Australian residents who work overseas.
Withholding amounts from payments
Each time you pay your worker, you're required to withhold a portion of their pay for tax. This is called pay as you go (PAYG) withholding.
By withholding tax, you're helping your worker meet their end-of-year tax liabilities.
You'll need to pay the amount withheld and report the amount withheld to us through both your:
- STP-enabled payroll software
- business activity statement (BAS)
How often you need to pay and report on activity statements depend on whether you're a:
You'll need to collect PAYG withholding amounts from payments you make to a worker, including if they're:
- an employee (this includes if they're a director)
- an independent contractor with a voluntary agreement or who don’t quote their Australian business number (ABN).
The amount of tax you withhold will depend on your worker's individual circumstances.
For example, there are different withholding rates for:
- working holiday makers
- workers hired under the Seasonal Worker Programme or Pacific Labour Scheme.
It's important to withhold the right amount of tax from payments you make to your worker.
To do this, use:
- accounting or payroll software
- the details on your employee's completed Tax file number declaration
- our tax tables
- our online tax withheld calculator.