STP Finalisation Declaration
An STP Finalisation Declaration is a digital notification sent to the ATO confirming that your payroll data for the financial year is complete and correct. It is required by the Taxation Administration Act 1953 so your employees can lodge tax returns.
A statement you submit to the Australian Taxation Office to confirm that you have reported all your employees' payment information for the financial year through Single Touch Payroll.
20 free credits on signup — no card needed
About this Document
An STP Finalisation Declaration is a critical step in the payroll process for every Australian business, from sole traders with employees to large companies. Single Touch Payroll or STP is a system that reports tax and super information to the Australian Taxation Office or ATO directly from your payroll solution at the same time you pay your employees. While STP reporting happens every pay cycle, the finalisation process happens once a year. This guide explains exactly what you need to do. This document is not a physical form you fill out by hand. It is a digital action you take in your payroll software. When you finalise your STP data, you are telling the ATO that your payroll records for the financial year are complete and correct. This process allows your employees to lodge their tax returns. If you do not finalise, your employees might face delays or errors when they try to get their tax refund. Understanding this process is vital for business compliance. The Australian taxation system relies on accurate and timely data. The Taxation Administration Act 1953 governs the administration of tax laws in Australia. Under this act, employers have specific obligations to report payments to workers. The introduction of STP was a major change to help employers meet these obligations more easily. It streamlined the reporting process. However, it also shifted the responsibility for accuracy and timing directly onto the employer. You must ensure your payroll software is set up correctly. You must also ensure that all payments for the year are entered before you finalise. Under the Fair Work Act 2009, employers must provide pay slips to employees within one working day of payment. While STP reporting happens separately, the data in your STP report must match the data on the pay slips. Inconsistencies can raise red flags with the ATO and Fair Work Ombudsman. For tradespeople and small business owners, payroll can be a burden. You might wear many hats, from managing worksites to ordering materials. Payroll administration often sits low on the priority list until the end of the financial year approaches. This guide will help you understand the STP finalisation process so you can manage it efficiently. You need to know when to finalise. You need to know what to check before you click the finalise button. You also need to know what to do if you make a mistake. The STP finalisation declaration replaces the old Payment Summary Annual Report. In the past, employers had to print payment summaries, give them to employees, and send a report to the ATO. Now, employees access their income statement through myGov. They can only view this finalised data after the employer completes the STP finalisation declaration. This shift to digital reporting reduces paper waste and administrative time. It does, however, require a reliable internet connection and compliant software. The ATO lists approved STP reporting software on their website. You must use one of these solutions. You can use desktop software, cloud based software, or a registered tax agent. Some bookkeepers offer STP services as part of their package. If you are a small business with closely held payees, such as family members or directors of a company, you have different reporting options. You can report quarterly rather than each pay day. However, you still need to finalise your data by the annual deadline. The deadline for STP finalisation is usually the 14th of July for businesses with 20 or more employees. For small businesses with 19 or fewer employees, the deadline is the 31st of July. If you use a tax agent or BAS agent, they may have different lodgment schedules. You should speak with them to confirm your specific due dates. Missing these deadlines can result in penalties. The ATO can impose failure to lodge on time penalties. These are calculated based on the size of your business. Keeping accurate records throughout the year makes the finalisation process smoother. You should reconcile your payroll accounts regularly. This means checking that the totals in your software match your bank statements. It also means checking that superannuation payments are up to date. The Superannuation Guarantee Act 1992 requires employers to pay superannuation contributions for eligible employees. You must pay these contributions at least four times a year. By the time you finalise your STP data, your superannuation guarantee charge for the June quarter should be calculated and ready to pay, though the payment deadline is later. Your STP report includes year to date figures for gross pay, tax withheld, and superannuation. It is that the tax withheld figure matches the amount you actually remitted to the ATO. You can check this on your Business Activity Statement or BAS. If there is a discrepancy, you must amend your STP data before you finalise. If you discover a mistake after you finalise, you can send an update. You should do this as soon as possible. It is better to catch errors early. For tradespeople, understanding the difference between employees and contractors is vital. You only report employees through STP. You do not report payments to contractors. The ATO and courts look at the whole working arrangement to determine if a worker is an employee or contractor. If you misclassify a worker, you may need to report their payments retrospectively. This can be a complex process. You should seek professional advice if you are unsure about a worker's status. The STP finalisation declaration also affects reportable fringe benefits and reportable employer super contributions. If you provide a car to an employee for private use, this is a fringe benefit. The value of this benefit must be reported on the employee's income statement. This does not affect the employee's taxable income, but it is used for other government obligations. Reportable employer super contributions are contributions you make for an employee where they have influenced the amount or rate. These must also be reported. These figures come from your fringe benefits tax return and your payroll records, not directly from your STP pay cycle reporting. You may need to manually enter these amounts into your software before finalising. The process of finalising is straightforward in most software packages. You navigate to the finalisation section. You select the relevant financial year. You review the employee details. You check the figures. You click the button to declare the information is true and correct. This is the legal declaration. By clicking this button, you are asserting that the data is accurate under penalty of law. You must keep your payroll records for at least five years. The ATO can request these records at any time. This includes digital records and back ups. If you change software providers, you must ensure you keep access to your old data. Security is also important. You must protect your employees' personal information. The Privacy Act 1988 regulates how businesses handle personal data. Your payroll software should have security measures in place. You should also use strong passwords and two factor authentication where available. For businesses with seasonal workers, you must ensure that all employees for the year are included in the finalisation. Even if a worker left in January, you must still finalise their data. Do not delete terminated employees from your software until you have finalised the previous financial year. If you sell your business, you must finalise STP data for the employees up to the date of sale. The new owner will then take over the reporting. This handover requires clear communication and accurate record transfers. Failure to finalise STP data can cause significant issues for your employees. Their income statements will not show as Tax Ready in myGov. This means the Australian Taxation Office will not pre fill their tax return with the correct information. This can lead to underpayment of tax or overpayment. It can also trigger compliance checks for the employee. Most employees will contact their employer immediately if they cannot see their income statement. This can lead to a rush of work for you during a busy time. Finalising on time avoids this stress. It ensures your employees can lodge their tax returns promptly. It also keeps your business in good standing with the ATO. This guide covers the legal requirements, the process, and the common pitfalls. It is designed for Australian tradespeople and small business owners who want to get it right the first time. We have referenced the Fair Work Act 2009 for pay slip obligations, the Taxation Administration Act 1953 for reporting obligations, and the Superannuation Guarantee Act 1992 for super obligations. We have also mentioned the Privacy Act 1988 regarding data security. Always check the ATO website for the most current information, as tax laws can change. Using a registered BAS agent or tax agent is a good way to manage your obligations if you find the process overwhelming. They can handle the finalisation for you and ensure compliance with all relevant legislation. This allows you to focus on running your business and completing your trade work.
Key Facts
- Employers must finalise STP data by 31 July for businesses with 19 or fewer employees, or 14 July for 20 or more.— Australian Taxation Office (ATO)
- Finalising STP allows employees to access their Income Statement via myGov to lodge their tax return.— Taxation Administration Act 1953 (Cth)
- Employers must keep payroll records for at least five years as required by law.— Fair Work Act 2009 (Cth)
- Closely held payees like family members can be reported quarterly but still need annual finalisation.— Australian Taxation Office (ATO)
- You must report Reportable Fringe Benefits amounts before you finalise your STP data.— Fringe Benefits Tax Assessment Act 1986 (Cth)
- The declaration replaces the old Payment Summary Annual Report process.— Treasury Laws Amendment (Treating Everyone Fairly) Act 2018
Sources
Required Sections
Understanding STP and Finalisation
This section explains the Single Touch Payroll system and specifically what the finalisation event means.
Understanding STP and Finalisation
Single Touch Payroll, or STP, is a reporting change introduced by the Australian Taxation Office. It is not just a new way to pay your employees. Under the Taxation Administration Act 1953, STP requires employers to send payroll information directly to the ATO at the same time they pay their staff.
Before STP, small businesses typically reported payroll information once a year. You would process pays throughout the year, withhold tax, and then summarise everything on a Payment Summary at the end of the financial year. You then lodged that data to the ATO months later.
STP changes this timeline. Now, you must report salaries, wages, pay as you go withholding, and superannuation information every time you run a payroll. This happens digitally through STP-enabled software. The ATO receives the data continuously throughout the year rather than in a single annual lodgement.
The Finalisation Declaration is the specific step you must take at the end of the financial year. Think of it as a year end lock of your data. While your software sends data to the ATO every pay cycle, the information remains marked as preliminary until you declare it final.
When you finalise your data, you are telling the ATO that the information for the specific financial year is complete and correct. This process replaces the old activity statement and payment summary process. It allows your employees to access their income statement through myGov immediately, rather than waiting for you to manually post or email a payment summary.
You must complete the Finalisation Declaration by 14 July if you have 19 or fewer employees. This deadline is critical. If you do not finalise by this date, your employees may not be able to lodge their tax returns on time. For businesses with 20 or more employees, the deadline is typically 31 July.
To perform a finalisation, you log into your STP-enabled software and review the year to date figures. You must ensure all pays for the financial year are processed and correct. You then select the option to finalise or close the year. The software sends a signal to the ATO confirming the data is locked. Once this happens, you cannot make changes without updating the record.
Compliance with STP is mandatory for all employers. The Single Touch Payroll (Reporting) Act 2019 outlines these obligations. Ensuring your data is accurate before you make the Finalisation Declaration avoids the need for corrections later and keeps your business compliant with Australian tax law.
Critical Dates for Lodgement
This section covers the specific deadlines for different business sizes and the role of tax agents.
Meeting your Single Touch Payroll (STP) finalisation deadlines is non-negotiable. If you miss these dates, the Australian Taxation Office (ATO) may apply penalties. You also risk upsetting your employees because they cannot lodge their own tax returns until your data is correct and finalised. The rules depend entirely on how many staff members you have on your books.
Businesses with 20 or more employees
If you have a headcount of 20 or more, you operate under stricter timelines. You must finalise your STP data for the previous financial year by 31 July. This deadline aligns with the lodgement due date for the Pay As You Go (PAYG) withholding annual report. It is a firm requirement under the Taxation Administration Act 1953.
Businesses with 19 or fewer employees
The ATO grants more time to smaller businesses, allowing you additional months to balance your books and correct any errors. You must finalise your data by 31 July if you are not using a registered tax agent. However, if you lodge through a tax agent, you receive a further extension.
Small business due dates:
- No tax agent: Finalise by 31 July.
- With tax agent: Finalise by the due date of your agent's own lodgement program. You must confirm this specific date with your agent, but it typically extends well into the new year. This concession recognises that small business owners often handle payroll themselves and need extra time.
Tax Agent Concessions
Using a registered tax agent is the best way to manage these deadlines legally. The Income Tax Assessment Act 1997 provides specific deferrals for agents. If you engage an agent, the ATO shifts the responsibility for the timing to them. You do not need to apply for this extension yourself. Simply ensure your agent has access to your STP software before the standard 31 July cutoff to avoid any data mismatches.
New Financial Year Reporting Cycle
Once you finalise the previous year's data, you must switch your payroll software to the new financial year immediately. Under the Fair Work Act 2009, you must issue payment summaries to employees by 14 July. If you are reporting through STP Phase 2, your employees can access their income statement directly via myGov once you finalise the data. You do not need to provide separate paper summaries unless an employee specifically requests it.
Keep accurate records of your finalisation declaration. If the ATO reviews your business, you must prove you met these timeframes under the Keeping Business Records guidance. Check your STP reporting software dashboard. It will show a status of "Finalised" only when the ATO accepts your data. Do not assume the process is complete until you see this confirmation.
Pre-Finalisation Data Checklist
A practical list of data points to verify before submitting the declaration.
Use this checklist to verify your Single Touch Payroll (STP) data before you submit your finalisation declaration to the Australian Taxation Office (ATO). Getting this right now prevents amendments and phone calls later.
1. Confirm all pay runs are entered Log into your payroll software and check the financial year dates. You must ensure every single pay run for the income year is entered and approved. Look for any gaps in the pay period schedule. If you processed a pay manually or used a different system during the year, you must import that data into your STP-enabled software. The ATO expects a complete record of payments made from 1 July to 30 June.
2. Reconcile PAYG withholding to your BAS This is a critical step. Compare the total Year-to-Date (YTD) PAYG withholding amounts shown in your payroll software against the actual amounts you reported on your Business Activity Statements (BAS). These two figures must match. If they differ, you cannot finalise your STP data until you find the error. Common causes include unreported payroll transactions or data entry errors when lodging your BAS. You may need to revise your BAS or adjust your payroll records to align the totals.
3. Verify Tax File Numbers (TFNs) Check your employee list for any invalid or missing Tax File Numbers. Under the Taxation Administration Act 1953, you are required to withhold at the top rate if an employee does not provide a valid TFN or an exemption. Review your software for warnings or errors related to TFN formats. Ensure TFNs are recorded correctly for all employees, including those who left during the year. This ensures your employees are not taxed more than necessary.
4. Review termination payments Check the records for any employees who stopped working for you during the year. Ensure all termination payments are correctly calculated and categorised. This includes lump sum payments for unused annual leave, long service leave, or redundancy payments. You must distinguish between employment termination payments (ETPs) and standard leave payouts. Verify that the tax withheld on these payments aligns with the rates in Schedule 5 of the Income Tax Rates Act 1986.
5. Validate employee details Ensure names and dates of birth are correct. The ATO uses these details to match income to the right individual. A simple spelling error can stop your employee from lodging their tax return. Check that the employee's legal name matches their official identification, not just their preferred nickname.
Once you have checked every item on this list and your YTD totals are accurate, you are ready to make your final declaration.
Reporting Fringe Benefits and Super
Instructions on how to handle additional reportable items outside of standard wages.
Reporting Fringe Benefits and Superannuation
You must report two specific amounts on your employee income statements through Single Touch Payroll (STP). These are Reportable Fringe Benefits Amounts (RFBA) and Reportable Employer Superannuation Contributions (RESC).
Reportable Fringe Benefits Amounts (RFBA)
You calculate the RFBA when the total taxable value of fringe benefits provided to an employee exceeds $2,000 in a financial year. Common examples for trades and small businesses include providing a company car for private use or paying private expenses. The value you report is not the same as the taxable value you use to calculate fringe benefits tax (FBT).
Under the Income Tax Assessment Act 1936, you must "gross up" the taxable value. This process adds the income tax the employee would have paid if they had received the cash salary instead of the benefit. You then report the lower grossed-up amount on the income statement. This figure represents the grossed-up salary-equivalent value of the benefits.
Reportable Employer Superannuation Contributions (RESC)
You report RESC when you make superannuation contributions for an employee under a salary sacrifice arrangement or where the contributions exceed the mandated superannuation guarantee. These are additional contributions you make on behalf of the employee that influence their reportable income for surcharge purposes. You generally do not report the standard compulsory superannuation guarantee contributions here.
Impact on Taxable Income
It is vital to understand that neither RFBA nor RESC are included in the employee's assessable or taxable income. Your employees do not pay income tax on these specific amounts when they lodge their tax returns. However, under the Income Tax Assessment Act 1997, these amounts are part of an employee's reportable employer superannuation contributions and reportable fringe benefits.
These figures are used for income tests. The Australian Taxation Office (ATO) uses these totals to determine eligibility for various government benefits and tax obligations. Examples include the Medicare levy surcharge, Higher Education Loan Program (HELP) repayments, and certain Centrelink benefits.
Finalising Declarations
When you finalise your STP data, ensure these figures are accurate. If you provide fringe benefits above the threshold or have salary sacrifice arrangements in place, the values must appear on the income statement. Check your payroll software calculations against the FBT rules to ensure the correct grossed-up amounts are reported before you submit the finalisation declaration.
Making Corrections and Amendments
Steps to take if errors are found after the declaration is made.
It is your responsibility to ensure the income, tax, and super information you report through Single Touch Payroll (STP) is correct. Even after you send a finalisation declaration to the Australian Taxation Office (ATO), you might find errors in the data. Under the Taxation Administration Act 1953, you must correct mistakes to ensure your employees are not over or under-taxed.
If you identify a mistake after finalising, you do not need to contact the ATO by phone or lodge a paper form. You must use your STP-enabled software to make the correction. This process updates the year-to-date totals stored by the ATO.
To fix the error, open your payroll software and find the specific pay run or employee record containing the wrong information. Correct the dollar amounts for gross wages, tax withheld, or superannuation. Once you save the changes, you need to send this updated data to the ATO.
Look for the 'Update event' or 'Amend' function within your software. This option tells the system that you are modifying existing information rather than reporting a new pay period. Selecting this function triggers the software to send a message to the ATO overwriting the previous figures with the correct totals.
If the software asks for a reason for the change, select the option that best describes the situation, such as a clerical error or a re-calculation of entitlements. Send the update event immediately after making the change.
After the update is successful, your software should confirm the data was sent. It may take a few days for the corrected information to appear in your ATO business portal or myGov account. You must also advise your affected employees that an amendment was made. They need to know their income statement has changed so they can check their tax return is accurate. If they have already lodged their tax return, they may need to request an amendment from the ATO.
Do not simply adjust the next pay period to fix errors from a previous financial year. You must correct the specific year the error occurred. Regularly checking your reports against your general ledger helps prevent small mistakes from becoming larger issues at the end of the financial year.
Employee Access to Income Statements
How employees receive their data and what the employer needs to tell them.
Employees need to know they can access their income statement through myGov. They no longer receive a physical payment summary from you. The income statement is the official record of their pay, tax, and super for the financial year. This information is essential for them to lodge their tax return with the Australian Taxation Office.
Your staff can log in to their myGov account and link it to the ATO. Once connected, they simply select the ATO tile and choose 'Income statements' from the employment menu. This finalised data appears in their myGov account after you complete the Single Touch Payroll (STP) finalisation declaration. It is important to explain to your employees that their income statement will be marked as 'Tax ready' only after you finish this process.
You must let your workers know when you have finalised the data. Until you complete this step, they cannot lodge their tax return accurately. Send a message, email, or put up a notice in the workshop telling them the finalisation is done. This communication is a standard expectation under the STP reporting framework. Under the Taxation Administration Act 1953, you are required to report payments to the ATO through STP. Finalising this data signals that the information is complete for the financial year.
Remind your team to check their income statement as soon as possible after you notify them. They need to ensure the details, such as their income and the amount of tax withheld, are correct. If they see any errors, they should contact you immediately so you can fix it in your payroll software and send an update to the ATO. Do not wait for them to ask. If you have casual staff or apprentices who might not be aware of the process, take the time to walk them through it. This prevents delays for them when they visit their tax agent.
Clear communication helps everyone meet their obligations. The ATO uses the data you provide to pre-fill their tax returns. If your employees try to lodge their return before you finalise the STP data, their tax return might be missing information or get held up. Making sure your staff know when to log into myGov keeps the business running smoothly and helps your employees stay on the right side of the law.
Frequently Asked Questions
What is a STP Finalisation Declaration?
When do I need a STP Finalisation Declaration?
Is a STP Finalisation Declaration legally required in Australia?
What happens if I make a mistake on the STP Finalisation Declaration?
Do I need to give employees a payment summary if I finalise STP?
Can I finalise STP if I have not paid my superannuation yet?
Does STP Finalisation cover contractors?
Explore More Documents
Ready to create your document?
Use our free template or generate a custom version tailored to your needs.
20 free credits on signup — no card needed
We recommend professional review for your specific situation.