Penalties for Non-Compliance with Single Touch Payroll (STP)

Penalties for non-compliance with Single Touch Payroll (STP) can significantly impact Australian businesses of all sizes, with fines ranging from hundreds to hundreds of thousands of dollars depending on your business size and the severity of non-compliance. As we move through 2025, the Australian Taxation Office (ATO) has strengthened its enforcement approach, making it more critical than ever for businesses to understand their obligations and the consequences of failing to meet them.

Understanding STP Reporting Requirements

Single Touch Payroll is a mandatory digital reporting system that requires employers to submit payroll information, including employees’ salaries, PAYG withholding, and superannuation details, to the ATO with every pay run. This reporting replaces traditional methods like payment summary annual reports and employee payment summaries.

STP has been implemented in two phases. Phase 1 became mandatory for all businesses by July 2019, requiring basic payroll reporting. Single Touch Payroll Phase 2, which began on January 1, 2022, expanded these requirements to include more detailed payroll data about employee income, employment conditions, and tax treatment codes.

Employers must report through STP every time they process payroll. Reports should be submitted on or before each payday using STP-enabled payroll systems or accounting software designed for compliance. Timely and accurate reporting is essential to avoid penalties and ensure that payroll records are correctly maintained.

Financial Penalties for Late or Missed STP Reports

The ATO has established a clear structure for penalties related to STP non-compliance, with amounts varying based on business size:

• Small businesses (annual turnover under $10 million): Penalties start at $210 for each 28-day period that an STP report remains overdue, up to a maximum of $1,050.
• Medium-sized businesses: The same base penalty applies but with a higher cap of $2,100.
• Large entities: Penalties can reach up to $5,250.
• Significant global entities: Penalties can climb as high as $525,000 for repeated non-compliance.

These penalties are not tax-deductible and represent a direct cost to your business’s bottom line. Employers who fail to generate accurate payroll reports or submit their STP data on time risk these financial consequences.

When and How the ATO Applies Penalties

While the penalty structure may seem intimidating, the ATO generally applies penalties only when employers are consecutively and repeatedly late with their STP reporting. Businesses are given an opportunity to correct mistakes without immediate fines—typically within 14 days—before penalties are enforced.

However, consistent non-compliance or knowingly reporting incorrect payroll information without correction increases the likelihood of penalties being applied promptly. This underscores the importance of timely reporting and ensuring accuracy in payroll data submitted through STP-enabled payroll software or accounting systems.

Recent Changes and Updates for 2025

As of 2025, several regulatory changes have heightened the importance of compliance with payroll reporting requirements:

Superannuation Guarantee Rate Increase

From July 1, 2025, the superannuation guarantee rate will rise to 12%. Employers must ensure their payroll systems reflect this change accurately when making payments. Failure to comply could result in superannuation shortfalls and penalties up to 200% of the unpaid amount.

Wage Theft Laws

Stronger wage theft laws introduced on January 1, 2025, now classify intentional underpayment as a criminal offense. Accurate payroll records are essential to avoid legal risks under these laws.

Superannuation Payment Frequency

From July 1, 2026, superannuation must be paid alongside wages rather than quarterly—a significant shift requiring updates in payroll processes and accounting software.

These changes highlight the need for employers to stay informed about evolving compliance requirements while ensuring their payroll systems remain updated.

How to Ensure STP Compliance

Avoiding penalties for non-compliance with Single Touch Payroll involves adopting proactive measures that streamline your reporting process:

Update Your Payroll Software

Ensure your accounting software is fully compliant with Single Touch Payroll Phase 2 requirements to avoid rejected reports due to outdated systems.

Establish Regular Reporting Processes

Create a consistent schedule for processing pay runs and submitting STP reports on time through registered agents or software developers.

Conduct Regular Audits

Review payroll data regularly for accuracy—especially after changes in wages, PAYG withheld amounts, or superannuation contributions—to ensure employee payment summaries align with ATO standards.

Seek Professional Guidance

Consult registered tax professionals or accountants if you’re unsure about any aspect of STP compliance. Their expertise can help small employers navigate complex requirements while ensuring proper reporting retirement savings.

Conclusion

Understanding the penalties for non-compliance with Single Touch Payroll is essential for protecting your business from unnecessary financial consequences. With the ATO taking a firmer stance on enforcement—particularly against repeat offenders—the cost of failing to report payroll information accurately continues to rise.

By implementing robust processes using STP-enabled payroll systems or accounting software tailored for compliance, businesses can minimize risks while meeting obligations efficiently. Regular audits of payroll records and timely submission of STP data not only prevent penalties but also ensure peace of mind when dealing with multiple government agencies like the ATO.

Have you reviewed your STP compliance lately? A simple audit today could save you significant penalties tomorrow while keeping your business aligned with government requirements!