If you pay staff, you report every payday to the ATO through Single Touch Payroll (STP). But there is one more step at the end of the financial year that a lot of employers either forget or leave too late: finalisation. Miss it, and your team cannot lodge their tax returns properly. Here is what STP finalisation actually is, in plain English, and what you need to do.
Every time you run payroll, your software sends the ATO a summary of what each employee earned and how much tax and super you withheld. That happens automatically through the year.
STP finalisation is the moment you tell the ATO, "that is the full year, and these numbers are final." You do it by making a finalisation declaration through your payroll software, once, after the last pay run of the financial year.
Think of it as the modern replacement for the old payment summaries (what most people still call group certificates). You no longer hand those out. Instead, once you finalise, each employee's income statement in myGov flips from "not tax ready" to "tax ready."
Until you finalise, your employees see their income statement marked "not tax ready" when they log in to myGov or when their accountant looks it up. They can technically lodge before then, but the ATO warns them the figures might change, and if they lodge early and the numbers move, they may have to amend the return.
Once you finalise, the data is locked in and confirmed. Your staff (or their tax agent) can lodge with confidence, knowing the income and tax figures are the ones you actually reported. So finalising on time is not just your compliance box to tick. It is the thing standing between your team and their tax refund.
For most employers, the finalisation declaration is due by 14 July each year, covering the financial year that just ended on 30 June.
There is one common exception. If you pay closely held payees (for example, family members working in a family business, or directors and shareholders drawing a wage), a different deadline applies to those people:
Here is the catch that trips people up. If you have a mix, say a couple of arm's length staff plus your spouse on the books, you still have to finalise the arm's length employees by 14 July and can use the later date only for the closely held ones.
When 14 July falls on a weekend, the ATO generally accepts finalisation on the next business day, but do not build your plans around that. Aim for the 14th.
The mechanics happen inside your payroll software (Xero, MYOB, QuickBooks and the rest all handle it), but the thinking is the same everywhere.
1. Finish the last pay run. Make sure every pay up to 30 June has been processed and reported. A pay dated 1 July belongs to the new year.
2. Reconcile your payroll. Check that total wages, PAYG withholding and super in your payroll match your accounts and your activity statements for the year. This is where most errors surface.
3. Check each employee. Confirm names, tax file numbers and any allowances, salary sacrifice or reportable fringe benefits are coded correctly. STP Phase 2 asks for more detail here than it used to, so it is worth a proper look.
4. Fix anything that is wrong. If you spot a mistake, correct it before you finalise. It is far easier to fix now than to reopen and amend later.
5. Lodge the finalisation declaration. Once the numbers are right, submit the declaration. That is the button that marks your employees as "tax ready."
You can still make changes after finalising if you find an error later. You just resubmit an amended finalisation, and the employee's income statement updates.
Not sure your payroll figures reconcile, or staring at STP Phase 2 codes wondering if they are right? Book a free call and we will walk through it with you before the deadline, not after.
Leaving it to 14 July. If your reconciliation throws up a problem, you want time to fix it. Start in early July, not the night before.
Forgetting terminated employees. Anyone who left during the year still needs to be finalised. They are relying on it too.
Assuming the software did it for you. Running your last pay is not the same as finalising. Finalisation is a separate, deliberate step you have to trigger.
Not reconciling first. Finalising figures that do not match your accounts just locks in the error and creates a headache at tax time.
If something genuinely gets in the way, finalise as soon as you can and keep your records of why you were held up. The bigger risk is silence. Employees start chasing you when their income statement is not tax ready, and an unfinalised year can flag you with the ATO. If you are running behind, a quick conversation with your accountant usually sorts out the fastest path through.
STP finalisation is the year-end declaration that confirms your payroll figures and lets your staff lodge their tax returns. For most employers it is due by 14 July, with a later date for closely held payees. Reconcile first, check every employee, then lodge the declaration. Done properly, it takes an afternoon. Done late, it becomes everyone's problem.
If payroll and STP are not something you want to think about every year, we can take it off your plate, with fixed fees agreed upfront and every question answered within 24 hours. Book your free call here.
This article is general information only and does not take into account your personal circumstances. Please seek advice tailored to your situation before acting.
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