ATO pivots to enforcement and penalties for STP breaches

The Australian Taxation Office has updated its website to announce a new draft Law Administration Practice Statement is coming on the administration of penalties that apply to employers or superannuation funds who fail to comply with Single Touch Payroll (STP) reporting obligations. The ATO has said the draft title of the new PS LA is “Administration of penalties that apply where employers or superannuation funds fail to comply with event-based reporting obligations”

What is STP?

STP reporting was designed to streamline and automate an employer’s reporting of payroll and superannuation information to the Commissioner. Employers are required to automatically report payroll and superannuation information to the Commissioner in real-time at the time the information is created.

STP reporting was progressively implemented through a staged transition approach. Mandatory STP reporting commenced on 1 July 2018 for large employers (entities with 20 or more employees) and became mandatory for small businesses (entities with 19 or fewer employees) from 1 July 2018.

Under Phase 1, information reported through STP included salaries and wages, PAYG withholding and superannuation. Under Phase 2, STP reporting was expanded from 1 January 2022 to widen the employment income an employer was required to report through STP.

Administrative penalties and STP reporting

The phased implementation of STP included an ongoing grace period for correcting errors and a modified application of administrative penalties which may have otherwise applied if a STP report was lodged late, or if it contained an error or omission that was ‘false or misleading’.

Under Phase 1, the grace period for failure to lodge penalties was for the first year an entity was required to report under STP. There was also a grace period offered for correcting false or misleading statements in STP reports without the imposition of administrative penalties.

Under Phase 2, the ATO website advised there would be no penalties for genuine mistakes in the first year of STP Phase 2 reporting (i.e. until 31 December 2022).

This modified application of the administrative penalty regime acknowledged that that there was a transition period for employers to begin using STP and there may be circumstances where (at least initially) automated systems would result in unintended errors.  In many instances, the ATO took an education-focused approach to early errors and breaches of STP reporting obligations.

The new PS LA

It is now 2025 and the transitional grace periods for administrative penalties have ended. The announcement highlights that the new draft PS LA is intended to guide ATO staff in administering penalties for employers and superannuation funds that fail to meet their reporting obligations. This signals a clear shift in the ATO’s compliance approach—from education to enforcement. Employers and superannuation funds are now expected to fully comply with STP reporting requirements or face administrative penalties.

What should you do to prepare?

While we wait to see what guidance the PS LA will provide, employers and superannuation funds should carefully review their STP reporting processes to ensure they meet all reporting obligations.  Where there are any niggling uncertainties about how to code or report payment components, employers should not delay in seeking advice to resolve those uncertainties.

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Authored by:
Amber Agustin, Partner
Chantal Katerelos, Senior Associate