STP Finalisation: What It Is, the 14 July Deadline & How to Finalise in Xero

What Is STP Finalisation?

Single Touch Payroll (STP) changed the way Australian employers report payroll to the ATO. Before STP, employers lodged a payment summary annual report (PSAR) each year and issued paper payment summaries (group certificates) to employees. Under STP, payroll data — wages, PAYG withholding, superannuation — is reported to the ATO in real time with each pay run.

At the end of the financial year, there is one final step: the STP finalisation declaration. This is the employer formally telling the ATO: "All payroll data for FY[year] is now complete and correct." When you submit the finalisation, the ATO switches each employee's income statement status from "Year to date" to "Tax ready".

That switch matters enormously to your employees. Tax ready means the ATO has confirmed the figures and pre-fills them into the employee's myTax (via myGov). The employee can then lodge their tax return with confidence that their income and withholding figures are correct. Until you finalise, your employees' tax returns are on hold — or they're lodging with incomplete data and facing an amendment process later.

STP finalisation replaces:

• Payment summaries (group certificates) — no longer issued to employees if using STP
• Payment Summary Annual Report (PSAR) — no longer lodged with the ATO if using STP

STP Finalisation Deadline: 14 July

The finalisation declaration is due by 14 July each year for the financial year ending 30 June.

The FY2024–25 finalisation deadline is 14 July 2025. If you are reading this in July 2025 and have not yet finalised, lodge immediately.

What Happens to Employees Before STP Finalisation?

Between the end of the financial year (30 June) and your finalisation declaration, your employees can see their year-to-date income and withholding figures in their myGov account — but it shows as "Year to date", not "Tax ready". This means:

• Employees can lodge their tax return using year-to-date figures — but the ATO recommends waiting for "Tax ready" status to avoid amendments
• Employees with other income sources (rental, investments, multiple employers) often prefer to wait for all income statements to be finalised before lodging
• Employees who lodge before finalisation may receive an amendment if any figures change on finalisation (e.g. if you process a year-end payroll correction)
• The ATO does not allow refunds to be issued on tax returns that include non-finalised income statements — so employees waiting for a refund are particularly affected by late finalisation

How to Finalise STP in Xero — Step by Step

Xero makes STP finalisation straightforward if your payroll is reconciled and your STP submissions are up to date. Here are the steps:

Step 1: Reconcile Your Payroll

Before finalising, ensure every pay run for the financial year has been approved and submitted to the ATO. In Xero, go to Payroll → Single Touch Payroll → Overview. Check for any unsubmitted or failed submissions. A failed submission means the ATO has not received that pay run's data — fix any failures before proceeding to finalisation.

Step 2: Run Year-End Payroll Review

In Xero, run the Payroll Activity Summary report (Reports → Payroll → Payroll Activity Summary) for the full financial year. Cross-check:

• Gross wages per employee match your pay run records
• PAYG withholding amounts match what was remitted on your BAS
• Superannuation amounts match what was paid to the fund
• Any salary sacrifice, allowances, FBT reportable amounts, and lump sum payments are correctly coded
• No duplicate pay runs or deleted/reversed runs have left orphaned STP data

Step 3: Process Any Corrections

If you find an error — a missed pay run, incorrect wage amount, super not correctly coded — process the correction as a pay run before finalising. In Xero, you can process a $0 correction pay run to adjust year-to-date figures without actually paying the employee. Once submitted to the ATO, the correction updates the STP data. You cannot correct payroll data by editing a finalisation — corrections must be pay runs.

Step 4: Submit the Finalisation Declaration

Go to Payroll → Single Touch Payroll → Finalisation. Select the financial year. Xero displays all employees with their finalised year-to-date figures. Review the totals. When satisfied:

1. Tick the checkbox next to each employee to include in the finalisation (you can finalise all employees or individually)
2. Click "Submit to ATO"
3. Xero asks you to confirm the finalisation declaration — this is a legal declaration that the data is correct
4. Xero submits the declaration and shows a confirmation screen with a submission ID

Processing time: within 1–3 business days of submission, employees' income statements in myGov will update from "Year to date" to "Tax ready".

Step 5: Notify Employees

You no longer need to hand-distribute payment summaries. However, it is good practice to notify employees that their income statement is now tax ready so they can lodge their return. A simple email — "Your income statement for FY[year] is now available in your myGov account (ATO online services) as 'Tax ready'. You can now lodge your tax return." — prevents unnecessary calls.

What Employees See After STP Finalisation

After finalisation, employees log into myGov → ATO online services → Income and summary → Income statements. They will see:

Once the status changes to "Tax ready", the employee's myTax pre-fills their salary and wages income, total tax withheld, and reportable FBT and super contributions (if any). Most employees with straightforward tax situations can review the pre-filled return and lodge in minutes — no paper, no manual data entry.

STP Phase 2: What Changed for Finalisation

STP Phase 2 expanded the data reported to the ATO in each pay run. Most Xero users were moved to Phase 2 automatically. The Phase 2 changes relevant to finalisation include:

• Income types are now disaggregated: salary and wages, closely held payee income, foreign employment income, working holiday maker income and others are now reported separately. At finalisation, each income type appears on a separate income statement line in the employee's myGov.
• Allowances are itemised: tools, vehicles, travel, laundry and other allowances are now reported at the allowance level. They appear separately in the pre-filled tax return, making it clearer what can and cannot be deducted.
• Salary sacrifice is separated: salary sacrificed super is now identified separately from employer contributions, which helps employees claim correct deductions.
• Lump sum payments require specific coding: termination payments, lump sum A/B/D/E must be coded correctly in Xero before finalisation. Errors here can result in incorrect tax treatment in the employee's return.

If your Xero payroll setup predates Phase 2 and you haven't reviewed your pay item codes, your finalisation may be submitting aggregate figures rather than the disaggregated Phase 2 format. Your bookkeeper can audit your Xero pay items and update them before you finalise.

What If You Miss the 14 July STP Finalisation Deadline?

If you cannot finalise by 14 July:

1. Lodge as soon as possible. A late finalisation is significantly better than no finalisation. The sooner you lodge, the sooner your employees can proceed with their tax returns.
2. Apply to the ATO for a deferral. If you have a genuine reason for being unable to finalise on time (software issue, records dispute, staff turnover), the ATO will grant a deferral. A deferral moves your deadline without incurring a failure-to-lodge penalty. Apply via the ATO's Online Services for Business portal or ask your BAS Agent to apply on your behalf.
3. Let your employees know. If your employees are waiting to lodge their tax returns, tell them there is a delay and when you expect to finalise. This prevents unnecessary complaints and protects your relationship with your team.
4. Do not issue paper payment summaries instead. Some employers default to issuing paper payment summaries when STP is late. This is incorrect — if you are enrolled in STP, you must finalise through STP. Paper summaries are no longer the correct method for STP employers.

Employers Exempt From STP — Are You Still Exempt?

Very few employers remain exempt from STP. The exemptions that existed in early STP years (micro-employers with 1–4 employees, seasonal employers, remote or overseas employers) have progressively closed. As of FY2025–26:

• Almost all employers with one or more employees are required to use STP
• Closely held payees (family members) can still be reported quarterly rather than each pay run, with finalisation by 30 September
• Employers in areas with genuinely unreliable internet may be eligible for exemption — apply through the ATO
• If you pay wages via a payroll provider or bureau, they may be finalising STP on your behalf — confirm this is happening

If you are unsure whether you are correctly enrolled in STP and submitting payroll data, your bookkeeper can check your ATO lodgement history in Xero's STP dashboard.

STP Finalisation Checklist

Use this checklist before submitting your annual STP finalisation:

Can You Amend STP Finalisation After Lodgement?

Yes. If you discover an error after submitting the finalisation — a missed pay run, incorrect allowance, super not coded — you can submit an amended finalisation in Xero. Process the correction as a pay run first, then re-submit finalisation for the affected employees. The ATO updates the income statement, and if the employee has already lodged their tax return, they will need to amend it with the corrected figures (the ATO may prompt them to do this automatically if the figures change materially).

There is no penalty for amending a finalisation — it is a normal part of year-end payroll management. Common reasons to amend include: year-end bonus paid and added retroactively, termination pay calculated incorrectly, additional super contribution identified after finalisation, or a pay run that was accidentally missed before the original submission.

STP Finalisation and Payday Super (From 1 July 2026)

From 1 July 2026, the Payday Super reforms require superannuation to be paid by employers within 7 days of each payday — no longer quarterly. This changes the payroll cycle significantly for many businesses. The STP finalisation process itself remains the same: submit the declaration by 14 July. However, the underlying payroll data the finalisation draws on will now include more frequent super payment records, and any super payment delays during the year will be visible in the finalisation data.

If your business is still processing super quarterly as of July 2026, this is non-compliant under Payday Super. Your bookkeeper should have transitioned you to per-pay-run super processing before 1 July 2026.

Frequently Asked Questions — STP Finalisation