The ATO says it will write to employers this month to inform them of what this will involve.
Those who employ 20 or more people will have to use STP-enabled software to report the tax and superannuation information of their employees to the tax office.
A statement quoted ATO assistant commissioner John Shepherd as saying that digital service providers would have to be ready to advice and support employers in the run-up the process becoming mandatory.
"It’s likely you’ll receive an increasing number of enquiries from current and prospective users in the coming weeks and months.
“As a first step, digital service providers should advise users when their product will be single touch payroll-ready, and encourage them to visit www.ato.gov.au/stp to download the ‘Get ready checklist’.
"If you have applied for a deferral the ATO will issue you a letter which you can provide to your users to confirm the deferred start date.
“We know that some users may not be ready to implement Single Touch Payroll by 1 July 2018, or your deferred start date. They should apply for their own deferral.
“We’ll also continue working closely with digital service providers over coming months to ensure that single touch payroll can be successfully implemented.”
Shepherd told iTWire that the ATO had been working with payroll software providers for the last 12 to 18 months on implementing the single touch payroll system.
"We have seen good collaboration from the providers," he said. "About 22 software providers would cover roughly 80% of all employers and 75 providers would cover about 95% of the employers who have to use this method from 1 July."
He said there were about 72,000 employers who would have to use the STP system.
As to the benefits, Shepherd said it would provide real-time data on both pay and superannuation. At the moment, employers had to remit super only once a quarter while the ATO received an annual report from the superannuation companies about the status of an individual's super.
The ATO would be in a position to know whether workers were getting the super they were due through this shift to the STP system.
"It will also help people who incur tax debts when filing their returns at the end of the year," he said, pointing out that many people did not know what kind of tax benefits or additional payments they would have to make and hence often ended up owing money to the tax office which they were not in a position to pay.
Shepherd said the aim was to provide data to individuals via their ATO accounts in the my.gov website, so that they were regularly kept updated about the state of their finances.
Asked about security, he said that this was being taken very seriously, and the ATO was working with industry to make sure that there were no snafus.
Regarding recent statements about encryption by the government, Shepherd said his understanding was that it was a case of breaking encryption when needed and not making it weak across the board. He gave the analogy of locks used for airline baggage where the authorities could open them, but nobody else could.
"We're happy with the way things are going at the moment," he said, adding that there was enough slack within the system to accommodate the odd payroll software provider who fell behind on the schedule.
"They are all mostly sure that they will have product ready on time," he added.