ATO Shifts from Education to Enforcement on STP Breaches

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The Australian Taxation Office (ATO) has announced a major shift in its approach to Single Touch Payroll (STP) reporting. Since STP was first introduced in 2018, the ATO has largely focused on educating employers and allowing them time to adapt. Now, with transitional periods ending, the ATO has confirmed it will move to enforcement and penalties for employers and superannuation funds that fail to comply.

A Quick Refresher on STP

STP was rolled out in two phases:

  • Phase 1 (2018): Employers began reporting wages, PAYG withholding and superannuation to the ATO in real time.
  • Phase 2 (from January 2022): Reporting was expanded to include a broader range of income components.

During these years, the ATO adopted a light-touch approach, often remitting penalties and giving employers time to upgrade their systems and processes.

What’s Changing in 2025?

The ATO has released a draft Law Administration Practice Statement, which sets out how penalties will be applied for:

  • late lodgment of STP reports
  • errors or omissions considered false or misleading

This marks a turning point: the expectation is that employers and super funds should now be fully compliant with STP rules.

Why This Matters for Employers

The penalties can be significant. Employers who fail to meet their STP obligations risk:

  • administrative fines for late or incorrect reporting
  • increased scrutiny from the ATO, including follow-up reviews or audits
  • reputational damage if non-compliance persists

In short, STP is no longer a “best practice” option — it is now a core compliance requirement.

What You Should Do Now

To avoid unnecessary risk, employers should:

  • Review and test STP systems to ensure accuracy and timeliness of reporting
  • Double-check payroll coding to make sure items are mapped correctly under Phase 2 rules
  • Engage advisors if there is uncertainty around compliance
  • Treat STP not just as administration, but as an integral part of business governance

The Takeaway

The ATO’s move from education to enforcement signals the end of the grace period. Businesses that stay proactive and maintain robust payroll systems will avoid penalties and protect their compliance record.

👉 At Richard A Bobb Chartered Accountants, we help businesses strengthen their STP frameworks and reduce risk. Contact us today if you’d like a payroll compliance review.

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