Every year, without fail, payroll administrators hit the end of the financial year, pull their numbers, and find that what they've been reporting to the ATO doesn't quite match what they've been processing in their payroll system.
It's one of the most common sources of stress at EOFY, and it sends people into a spiral of double-checking pay runs, re-running reports, and wondering where on earth the difference came from.
The good news: in most cases, it's explainable. And once you know the most common causes, you can catch them early rather than scrambling in June.
Here's what's usually going on.
This is the one that catches people most often, and it's genuinely counterintuitive until you understand how STP reporting works.
When the ATO assigns a pay run to a financial year, it uses the date the pay run was paid, not the pay period it covers.
So if you run a pay period covering 16-30 June, but you process and pay it on 2 July, that pay run belongs to FY2026-27, not FY2025-26.
When you're reconciling, if you include that pay run in your FY2025-26 figures but the ATO is counting it in the following year, you'll see a discrepancy that looks like a mistake but isn't.
The fix: when comparing payroll figures to STP figures, make sure you're only including pay runs whose paid date falls within the financial year you're reconciling. Not the pay period. The paid date.
Every pay category and deduction in your payroll system has an STP classification that tells the ATO what type of payment it is. Allowances, salary sacrifice, child support, pre-tax deductions. They all need to be classified correctly, or the wrong amount gets reported under the wrong income type.
If a pay category has been sitting on the wrong classification all year, the amounts will have been flowing through to the ATO with incorrect labels. When you pull your year-to-date variance report and compare what was processed in your pay runs to what was reported via STP, you'll see a positive or negative difference.
The fix: review your pay category and deduction category classifications in your payroll settings before you get to finalisation. In most payroll systems, reclassifying a category will apply retrospectively in your next STP submission, so catching it now means it gets corrected before finalisation, not after.
If you're processing salary sacrifice arrangements, this one deserves particular attention.
Under STP Phase 2 (which has been in place for a few years now, but still trips people up), the gross amount reported to the ATO is the pre-sacrifice gross, not the post-sacrifice amount. The salary sacrifice is then reported separately as its own classification.
If your salary sacrifice deduction categories aren't set up with the right STP classification, your reportable gross will look different to what you see in your payroll reports. This tends to show up as a positive variance. The ATO is seeing a higher gross than your payroll register shows, because the sacrifice amount wasn't correctly itemised.
The fix: check that any salary sacrifice deductions are classified as either salary sacrifice super or salary sacrifice other employee benefits, depending on what the arrangement covers.
If a pay event failed to lodge with the ATO, or lodged partially, the year-to-date figures the ATO holds for that period won't match your payroll. This typically shows up as a negative variance: the ATO has less on record than your payroll system processed.
It's worth pulling your STP event report and checking that every pay event across the year went through successfully.
Any that show as failed or pending need to be investigated and relodged before you attempt finalisation.
In Pay Cat, you can check your reconciliation position right now. You don't have to wait until June.
Go to Reports > Single Touch Payroll, create an update event for the current financial year, and download the Excel year-to-date report. The variance tab compares your STP year-to-date figures against your payroll year-to-date figures side by side.
If the variance is zero (or within a dollar or two for rounding), you're in good shape. Anything more than that is worth investigating before it becomes a problem at finalisation time.
Want a printable reference for everything covered above? Download the Pay Cat EOFY Payroll Prep Checklist, a step-by-step guide covering all nine areas to check before STP finalisation.
The reason EOFY feels stressful is that most of this work gets left until the last few weeks, when there's no time to investigate properly.
If you run your variance report now and find a discrepancy, you have time to work out where it's coming from, fix the classifications, relodge any failed events, and approach finalisation with clean data.
If you leave it until June and find the same discrepancy, you're trying to untangle months of pay runs under time pressure.
We'll be doing a full STP finalisation walkthrough closer to the end of the year. In the meantime, if anything in your payroll data doesn't look right, our team is here to help.
Pay Cat is payroll software built for SCHADS Award compliance and modern award employers. Our team supports payroll administrators and finance managers through every pay run, including the stressful ones.