Single Touch Payroll: A Checklist for New Employers

Hiring a first employee is a milestone most Melbourne service business owners look forward to. What catches many out is that Single Touch Payroll (STP) reporting obligations apply from day one — there's no grace period, no small-employer exemption, and no option to report annually instead. Getting the setup right before the first pay run saves a scramble afterwards.

What Single Touch Payroll actually requires

STP requires employers to report salary and wages, PAYG withholding, and superannuation liability information to the ATO electronically, each time payroll is processed — not once a year at tax time. This information flows into the employee's income statement, which now largely replaces the old paper payment summary, and gives the ATO real-time visibility into payroll compliance across the economy.

1. Register for PAYG withholding before the first pay run

Before any wages are paid, the business needs to be registered for PAYG withholding with the ATO, if it isn't already. This is a separate registration from your ABN and GST registration, and it needs to be active before STP reporting can begin.

2. Choose and set up STP-enabled payroll software

Almost all STP reporting today runs through payroll software — Xero Payroll is the most common choice for Melbourne service businesses already using Xero for bookkeeping. The software handles the STP submission automatically each pay run, calculates PAYG withholding based on the employee's declared tax details, and tracks super accruals.

3. Collect the right paperwork from your new employee

Before the first pay run, you need a completed Tax File Number declaration, the employee's chosen (or default) superannuation fund details, bank account details for payment, and confirmation of which Award or Agreement classification applies to their role — this determines minimum pay rates, allowances, and entitlements.

4. Understand your superannuation timing obligations

Superannuation guarantee is currently due quarterly, by the 28th of the month following each quarter's end. It's worth building this into a cash flow calendar from the outset, since late super payments attract the Superannuation Guarantee Charge — a materially harsher penalty than paying late in the first place, and one that isn't tax-deductible even once paid. Employers should also track the ongoing shift toward Payday Super, which changes the timing to align with each pay run rather than quarterly, and plan for the cash flow impact of that transition well before it becomes mandatory rather than adjusting at the last minute.

5. Set a recurring reconciliation habit, not a one-off setup

STP reporting isn't a "set and forget" system. Each pay run needs to reconcile correctly — gross pay, tax withheld, super accrued, and any leave movements — and errors are far easier to fix within the same STP reporting period than after several pay runs have compounded on top of a mistake. Many new employers assume that once payroll software is configured, the system runs itself; in practice, changes to an employee's hours, a missed allowance, or an incorrect Award classification can all throw off an STP report in ways that are only obvious if someone is actually checking each pay run against expectations.

What happens if you get it wrong

Getting STP wrong in the first few months rarely means an instant penalty. It usually means a slow build-up of small errors — an underpaid super amount here, a misclassified allowance there — that eventually surface as a larger correction exercise, often discovered by an accountant during tax time or by the ATO during a routine data-matching check. Fixing these errors after the fact takes considerably longer than getting the setup right from the first pay run, and can leave an employee short-paid in the interim, which creates its own set of problems with trust and compliance.

Checklist before your first pay run

• PAYG withholding registration — active with the ATO before wages are paid
• STP-enabled payroll software — set up and connected to the ATO
• Tax File Number declaration — completed by the new employee
• Superannuation fund details — nominated fund or default fund acceptance on file
• Award or Agreement classification — confirmed correct pay rate and entitlements

Getting this right before the first pay run — rather than retrofitting it afterwards — is one of the simplest ways a new employer avoids both ATO compliance risk and hours of unnecessary rework in Xero.