Everything foreign employers need to know about STP compliance in Australia for 2026
Last Updated: January 2026
Key Takeaways (TLDR)
- Mandatory for all employers: Every employer with Australian employees must report through STP, regardless of company size or country of incorporation
- Real-time reporting: Payroll data must be submitted to the ATO on or before each payday
- STP Phase 2: Expanded reporting requirements are now fully implemented, including detailed income type categorisation
- Software required: You must use ATO-compliant STP-enabled payroll software or engage a registered tax agent
- Financial year finalisation: STP data must be finalised by 14 July following the end of each financial year (30 June)
- Penalties apply: Non-compliance can result in penalties of up to $1,820 per failure for small entities (5 penalty units at $364, the value from 1 July 2026)
What is Single Touch Payroll?
Single Touch Payroll (STP) is a government initiative that streamlines business reporting obligations by requiring employers to report tax and superannuation information directly to the ATO each time they pay their employees. The system was introduced in stages from 2018 and is now mandatory for all Australian employers.
For foreign employers operating in Australia, STP represents a significant compliance requirement. Unlike traditional end-of-year reporting, STP creates a real-time flow of payroll data to the tax authority, enabling the ATO to pre-fill employee tax returns and identify compliance issues earlier.
STP Phase 2 Requirements (Current 2026)
STP Phase 2 introduced expanded reporting requirements that are now fully mandatory:
- Disaggregation of gross payments: Gross earnings must now be broken down into specific categories including ordinary earnings, overtime, bonuses, directors fees, and paid leave
- Income types: Each payment must be classified with an income type code
- Country codes: For working holiday makers, you must report the employee’s country of origin
- Tax treatment codes: A six-character code indicating the basis for PAYG withholding calculations
- Employment basis: Classification as full-time, part-time, casual, or labour hire
- Cessation details: When employment ends, you must report the cessation type and date
Who Must Report Through STP
STP reporting is mandatory for all employers who make payments to employees in Australia. This includes:
- Foreign companies with an Australian branch or subsidiary
- Foreign companies employing Australian residents remotely
- Companies with any number of employees (no minimum threshold)
- Employers of closely held payees (e.g., directors, family members)
- Employers using labour hire arrangements
- Religious institutions and non-profit organisations
What Information is Reported
Employee Information
- Tax File Number (TFN) or TFN exemption details
- Full legal name and date of birth
- Residential address
- Employment start date and basis (full-time, part-time, casual)
- Tax treatment code
Payment Information
- Gross payments (disaggregated by type)
- PAYG withholding amounts
- Allowances (categorised by type)
- Deductions (including salary sacrifice)
- Reportable fringe benefits
- Lump sum payments (categorised A, B, D, E)
Superannuation Information
- Ordinary time earnings (OTE)
- Super guarantee amounts payable
- Fund details and member numbers
STP-Enabled Software Options
Full Payroll Software Solutions
- Xero Payroll: Cloud-based, suitable for small to medium businesses
- MYOB: Offers both desktop and cloud versions for various business sizes
- QuickBooks Online: Integrated accounting and payroll solution
- Employment Hero: Combined HR and payroll platform
- KeyPay: Cloud-based with strong automation features
Outsourced Options
- Registered tax agents can lodge STP reports on your behalf
- Payroll service providers can manage entire payroll function including STP
- Employer of Record (EOR) services handle all employment and reporting obligations
Reporting Deadlines and Frequency
| Pay Cycle | Reporting Deadline | Example |
|---|---|---|
| Weekly | On or before each weekly payday | Pay Friday, report by Friday |
| Fortnightly | On or before each fortnightly payday | Pay every second Thursday, report by that Thursday |
| Monthly | On or before monthly payday | Pay last day of month, report by that day |
| Quarterly (closely held only) | Within 14 days after quarter end | Quarter ends 30 Sept, report by 14 Oct |
STP Annual Timeline
| Date | Obligation |
|---|---|
| Each payday | Submit STP report for all employee payments |
| 30 June | Financial year end – ensure all pay runs to this date are reported |
| 14 July | STP finalisation due – submit final declaration for all employees |
| 14 August | Extended deadline for closely held payees only |
Penalties for Non-Compliance
| Failure Type | Penalty (from 1 July 2026) | Notes |
|---|---|---|
| Failure to lodge STP report | $364 per 28 days late, up to $1,820 (small employers); double for medium and five times for large employers | Failure to lodge on time (TAA Sch 1 s286-75, s286-80) |
| Failure to provide TFN | $364 per statement | For not including known TFN |
Frequently Asked Questions
Do I need to register for STP separately from PAYG withholding?
No, there is no separate STP registration. Once you are registered for PAYG withholding and have STP-enabled software connected to the ATO, you can begin submitting STP reports.
What if I have employees in multiple countries but only some in Australia?
STP only applies to employees who are subject to Australian PAYG withholding. You report only your Australian-based employees or Australian tax residents through STP.
Can I use my home country’s payroll software for Australian STP?
Your software must be ATO-certified for STP Phase 2 reporting. Most international payroll systems are not certified. You will likely need Australian payroll software, a payroll provider, or an Employer of Record service.
Do I still need to issue payment summaries to employees?
No. STP replaces payment summaries for all income types reported through the system. After you finalise your STP data, employees can access their income statement through myGov.
Is STP required for contractors paid via ABN invoices?
No. STP only applies to payments made to employees where you have withheld PAYG tax. Independent contractors who provide services under their own ABN are not reported through STP.
Need Help with STP Compliance?
Managing Australian payroll compliance as a foreign employer can be complex. AusBusinessRegister offers specialised services to help you meet your obligations.
Related Guides
This content is general information only and is not legal, financial or tax advice. Laws and regulations change often. For advice on your circumstances, speak to a qualified adviser.