EOFY Payroll Finalisation

Every July, employees start chasing their employers because their income statement in myGov still says Not tax ready. The cause is almost always the same: the STP finalisation declaration has not been made, or it was made in a hurry before the payroll numbers were actually checked.

Finalisation is due by 14th July each year for most employers, which leaves a short window after the last June pay run to get it right.

What finalisation actually is

The finalisation declaration is you telling the ATO that the year-to-date amounts you reported through Single Touch Payroll are complete and correct for each employee. Once made, each income statement flips to Tax ready, and employees and their tax agents can rely on it to lodge. It replaces the old payment summary annual report - there is nothing separate to lodge if all payments went through STP.

A sensible finalisation process

• Process every pay run for the year first, including any bonuses, commissions or adjustments dated on or before 30th June.
• Reconcile gross wages, PAYG withholding and super in your payroll reports against the general ledger.
• Reconcile the same totals against the wages and withholding reported on your activity statements for the year, and investigate any gap before finalising.
• Check terminated employees - final pays, unused leave and any employment termination payments should be coded correctly, not dumped into gross.
• Add reportable fringe benefits amounts if you provided fringe benefits above the reporting threshold - payroll software will not know about these unless you enter them.
• Only then make the declaration.

What we commonly see go wrong

• Finalising too early, before a late bonus or a June adjustment run, then having to re-finalise while employees have already lodged on the wrong figures.
• Forgetting mid-year terminations - everyone still employed gets finalised, but the person who left in October does not, and their return stalls.
• Duplicate income statements after a payroll software change, where the old system was never finalised or zeroed out, so the employee appears to have earned double.
• Missing reportable fringe benefits, which affect employee obligations such as Medicare levy surcharge and study loan repayments even though they are not taxed directly.
• Payroll that never hit payroll - directors fees or wages journalled straight to the ledger without going through STP at all.

If you find an error after finalising

Finalisation is not set in stone. You can amend the data and re-finalise, and the ATO expects corrections as soon as practical after you find the error. The real cost of a late fix is human: an employee who has already lodged may need to amend their return. Tell affected employees promptly.

When to get advice

Get help if your STP totals will not reconcile to the ledger or the activity statements, if you changed payroll systems during the year, or if you pay closely held payees such as family members - different finalisation deadlines apply to them. We see this often: the reconciliation takes an hour when payroll was maintained, and days when it was not.

When is STP finalisation due?

For most employers the declaration is due by 14th July after the end of the financial year. Later deadlines apply for closely held payees of small employers - check the current ATO dates for your situation.

What if my STP totals do not match my accounts?

Do not finalise until you know why. Common causes are unposted pay runs, manual journals to wages accounts, or pay items mapped to the wrong category, and finalising on wrong numbers just moves the problem onto your employees.

Do I still need to give employees payment summaries?

No. Once you finalise through STP, employees access their income statement in myGov or via their tax agent, and no payment summary annual report is required for STP-reported amounts.