The Complete STP Variance Guide

Most variance issues stem from a misunderstanding of what STP is and how data moves through it. Before troubleshooting, understand the system you are troubleshooting.

The STP Data Flow

Every dollar paid to an employee travels through this chain before it appears on their income statement in MyGov:

1. Pay Run Processed in Payroll
2. Pay Categories & Classifications Applied — pay categories determine how earnings are classified.
3. Employee Tax Configuration Read — employee tax setup determines withholding and income type.
4. STP Pay Event Created — STP event created with YTD figures for each employee.
5. ATO Validation & Storage — event transmitted to ATO; ATO validates and stores latest YTD.
6. Employee Income Statement (MyGov) — employee can see their income statement (from 1 July).
7. EOFY Finalisation Lodged — employer lodges finalisation event marking Is Final = Y.
8. Income Statement “Tax Ready” in MyGov

STP Phase 2 - What Changed and Why It Matters

STP Phase 2 introduced disaggregation: earnings that were previously reported as a single gross figure now must be broken into specific categories. This is the root cause of many modern variances.

📋 Leave must be classified

Annual leave, personal leave, long service leave - each reported in its own STP field, not lumped into ordinary earnings.

📋 Allowances must be classified

Tool, travel, uniform, laundry allowances -  must carry an Allowance STP classification or they fall into ordinary earnings.

📋 Salary sacrifice must be classified

Pre-tax deductions must be marked as either salary sacrifice (super) or salary sacrifice (other) — not left as “Default.”

📋 Income types are mandatory

Each employee must have an income type (S&W, WHM, Closely Held, Labour Hire, etc.) - this drives tax rates and reporting rules.

Every column in the YTD workbook corresponds to an STP reporting field. Understanding what each field means is essential to diagnosing which field has a variance and why.

Every employee must have an Income Type set in their tax details. The income type controls how the ATO taxes and reports their earnings. An incorrect income type will cause incorrect PAYG withholding, incorrect income statement presentation, and confusing apparent “variances” that are not actually errors.

SAW - Salary and Wages

Standard employees. The default income type. Normal PAYG withholding rates apply using the employee’s TFN declaration settings (tax-free threshold, HELP debt, etc.).

WHM - Working Holiday Maker

Employees on a Working Holiday Visa (subclass 417 or 462). Flat 15% tax rate applies on first $45,000, then 32.5%. A PAYG “variance” may simply reflect this different rate — always verify income type before escalating.

CHP - Closely Held Payee

Directors, shareholders, and family members of closely held companies. Reported quarterly rather than every pay event. A negative variance at any point before Q4 lodgement is normal and expected.

LHW - Labour Hire

Workers supplied through a labour hire arrangement. Special reporting requirements apply under the PAYGW rules. Tax must be withheld regardless of whether the worker quotes an ABN.

IAA - Inbound Assignee to Australia

Employees assigned to work in Australia by an overseas entity. Special ATO reporting requirements. Tax treaty provisions may reduce or eliminate Australian withholding.

Troubleshooting income type issues: If an employee’s PAYG variance cannot be explained by any pay category misconfiguration, always check their income type in Payroll → Employee → Tax Details. An employee set to WHM when they should be S&W (or vice versa) will produce a PAYG variance that mirrors the entire year’s withholding difference.

Before beginning any investigation, commit these rules to memory. Violating any one of them is the fastest way to create a new problem while trying to fix an existing one.

Rule 1 - Always investigate per employee, per entity, per income type

Never compare totals across the whole file. An employee who changed entities mid-year has two legitimate rows. Adding them together will give a false total.

Rule 2 - Rounding Variances Under $2.00 may not be an issue

The ATO allows up to $2.00 aggregate rounding per employee. Attempting to fix sub-$2 variances may introduce larger errors than the one you are trying to remove.

Rule 3 - Always refresh the finalisation event after making any configuration change

Changing a pay category classification does not retroactively update previously lodged STP events. You must regenerate the finalisation event to capture the corrected figures. Or if you have an open event Click Actions> Refresh in the top right of the screen

Rule 4 - Payroll YTD and STP YTD are not the same dataset

They originate from different sources. Payroll YTD reflects processed pay runs. STP YTD reflects what was actually lodged with the ATO. Failed events, timing differences, and schedule mismatches can create legitimate differences.

Rule 5 - Changing a pay category does not automatically notify the ATO

After any configuration change, a new STP event must be lodged. The ATO is only updated when a successful event is transmitted. No event = no update, regardless of what you changed in payroll settings.

Rule 6 - ETP variances are always investigated regardless of dollar amount

Employment Termination Payments affect tax at the individual level and have special ATO rules. The tolerance rule ($2.00) does not apply to ETPs. A $0.01 ETP variance must be investigated.

Rule 7 - MyGov takes 24–48 hours to reflect a lodged event

Do not assume an Update Event failed because MyGov has not updated immediately. Wait 24–48 hours and then check again before taking any further action.

An STP variance occurs when the Payroll YTD totals don’t match what was reported to the ATO via Single Touch Payroll. The Variance tab in your YTD workbook performs this comparison automatically - a non-zero result indicates a mismatch that may need investigation.

Rounding of $0.05 per field (up to $2.00 aggregate per employee) is normal and does not need to be fixed. Only investigate variances that exceed the tolerance threshold.

STP Reportable Amount = STP Gross - Salary Sacrifice - Lump Sum D - Tax Free Allowances

Compared to: Payroll YTD Taxable Earnings

If STP > Payroll → Positive variance (over-reported to ATO)

If STP < Payroll → Negative variance (under-reported to ATO)

⇧ Positive Variance (STP > Payroll)

• Over-reported to ATO
• Employee income statements may show overstated income
• Common causes:
  • Pre-tax deductions not classified
  • PAYG-exempt category without Allowance classification
  • Entity change error (duplicate records) 

⇩ Negative Variance (STP < Payroll)

• Under-reported to ATO
• Employee income statements may show understated income
• Common causes:
  • Closely Held quarterly lodgement outstanding
  • Failed or partially successful pay events
  • Ad hoc pay runs not included in STP event

Tolerance Rules

Tolerance rules:

• Aggregate per employee: $2.00
• If total variance ≤ $2.00 → within tolerance → no action needed
• Exception: ETP variance is always investigated regardless of amount

Navigation: Payroll → Reports → Single Touch Payroll → Click into event> STP Report → Export Excel (YTD)

The workbook contains five tabs. Each serves a different investigation purpose.

📋 STP YTD - What was reported to the ATO. Includes Is Final column. Line-itemed by Employee + Entity + Income Type. This is the source of truth for what the ATO holds.

📊 Itemised Gross - Same STP data broken into individual payment classifications: ordinary, leave, allowances, salary sacrifice, overtime, etc. Use this to find which specific pay category is causing a mismatch.

💰 ETP - Employment Termination Payments reported via STP. Always cross-check this tab against the STP YTD ETP column.

📁 Payroll YTD - What was processed in finalised pay runs. Includes ad hoc pay runs. Includes closely held employees. Note: only includes employees whose primary pay schedule matches the selected schedule.

⚡ Variance - Pre-calculated comparison of STP vs Payroll totals. $0 = all clear. Any value >$2 per employee = investigate before lodging finalisation.

Always investigate in this order. Every investigation starts at Step 1 regardless of what the variance looks like.

Step 1 — Does every employee exist in both tabs?

Compare employee names across STP YTD and Payroll YTD. Missing employees in STP YTD = earnings never reported. Missing employees in Payroll YTD = STP event for an employee with no matching pay runs (check entity/schedule selection).

Step 2 — Is the total variance within tolerance ($2.00 per employee)?

Open the Variance tab. Review the aggregate variance per employee. If all employees are ≤ $2.00, this is normal rounding. Proceed to finalisation. If any employee exceeds $2.00 (or has any ETP variance), proceed to Step 4.

Step 3 — Is the variance positive (STP > Payroll) or negative (STP < Payroll)?

Determine the direction of the variance. Positive and negative variances have different root causes and different fixes. Do not guess - identify the direction first. This tells you which set of causes to investigate in Steps 4A or 4B.

Step 4 — Drill into the Itemised Gross tab to identify the specific pay category

Filter the Itemised Gross tab to the affected employee. Compare each classification row against the corresponding STP YTD column using the Comparison Rules table in the Comparison & Drill-Down Method section. Identify the specific pay category or classification that is causing the mismatch.

Use this tree to quickly navigate to the correct fix for any variance scenario.

$0 Variance Showing

• If Y - Lodge your event 
• If N - Create an Update event and see if there is still a variance showing 

Variance is More than a few Dollars

Determine direction of the variance for each affected employee:

STP YTD tab are higher than the figures in the Payroll YTD tab (Positive Variance) 

Check 1: Open STP YTD → “Pre-Tax Deductions (Not Classified)” column > $0?

➡ YES → Pre-tax deductions not classified. Fix deduction category STP classification. See Positive Variance - Causes and Fixes, Cause 1.

Check 2: Is the employee set up with salary sacrifice (novated lease, pre-tax benefits)?

➡ YES → Verify deduction category is set to “Salary sacrifice (other employee benefits)”. See Positive Variance - Causes and Fixes, Cause 1.

Check 3: Does the employee have PAYG-exempt allowances?

➡ YES → Check pay category Classification = “Allowance”. If “Default”, allowance is flowing into ordinary earnings. See Positive Variance - Causes and Fixes, Cause 2.

Check 4: Does the employee appear on two rows with different entities?

➡ YES → Entity change duplicate. Review entity change setup. See Positive Variance - Causes and Fixes, Cause 3.

If Earnings are overstated follow the process here.

⇩ Negative Variance (STP < Payroll)

Check 1: Is the employee a director, shareholder, or family member?

➡ YES → Closely Held Employee with outstanding quarterly lodgement. Complete Q4 lodgement first. See Negative Variance — Causes and Fixes, Cause 1.

Check 2: Check STP event history — any events with status “Failed” or “Partially Successful”?

➡ YES → Create Update Event for affected employees. See Negative Variance — Causes and Fixes, Cause 2.

Check 3: Were any employees paid via an ad hoc or off-cycle pay run which is causing the variance?

➡ YES →Create Update Event for those employees. See Negative Variance — Causes and Fixes, Cause 3.

Check 4: Is the employee in Payroll YTD but not in STP YTD at all?

➡ YES → Earnings never reported. Create Update Event with full YTD for that employee.

A positive variance means you have over-reported to the ATO. Employee income statements will show more income than they actually received. This is generally caused by earnings that should have been excluded from gross, or deductions that should have reduced taxable income but weren’t classified correctly.

Cause 1 — Most Common

Pre-Tax Deductions Not Classified (Salary Sacrifice)

How to spot it: Open STP YTD tab → look at the “Pre-Tax Deductions (Not classified)” column. Any value > $0 confirms this is the cause. The variance will roughly equal the Not Classified amount.

Why it happens: STP Phase 2 requires salary sacrifice to be reported in specific fields (salary sacrifice super, salary sacrifice other). If pre-tax deduction categories weren’t updated after Phase 2 migration, they fall through as “Not classified.” STP then reports the full gross without reducing it for the salary sacrifice, causing over-reporting.

Fix step-by-step:

• Go to Payroll → Pay Settings → Deductions
• For each pre-tax deduction that reduces taxable income, check its STP classification.
• Set to the correct classification:
  • Salary sacrifice (superannuation)— for super salary sacrifice (employee elected super above SG)
  • Salary sacrifice (other employee benefits)— for novated leases, pre-tax extras, and all other salary sacrifice
•  
• Save.
• Return to the finalisation event → Refresh Data → download updated YTD report.
• Confirm the “Pre-Tax (Not classified)” column now shows $0.
• Lodge the finalisation event.

Cause 2

PAYG-Exempt Pay Category Without Allowance Classification

How to spot it: Export a Pay Categories report from Payroll → Pay Categories→ Download. Look for categories marked PAYG Exempt with a Payment Classification of “Default” instead of “Allowance.” Cross-reference against the Itemised Gross tab - do the Allowance rows match STP YTD Column J?

Why it happens: PAYG-exempt pay categories (tool of trade allowance, travel allowance, uniform allowance, etc.) must carry the “Allowance” STP classification so they are reported in the correct STP field and excluded from taxable ordinary earnings. If left as “Default,” STP treats them as ordinary earnings - inflating gross and taxable income.

Fix step-by-step:

• Payroll → Pay Settings → Pay Categories → find the PAYG Exempt category.
• Change Payment Classification from “Default” to “Allowance” and select the appropriate allowance sub-type (e.g., Tool allowance, Travel allowance, etc.).
• Save.
• Refresh the finalisation event → download updated YTD report → confirm variance is resolved.

Common allowance sub-types under STP Phase 2: Tool allowance, Travel allowance, Laundry allowance, Uniform allowance, Motor vehicle allowance (cents per km), Award transport allowance. Each must be classified to its specific sub-type, not just “Allowance.”

Cause 3

Duplicate Records from Employing Entity Change

How to spot it: In the STP YTD tab, the same employee appears on two rows with different entities. The STP total across both rows exceeds the Payroll YTD total for that employee. Often the combined STP total is exactly double what it should be.

Why it happens: The entity change was not completed correctly - the employee’s historical STP data was duplicated rather than transferred. Note: having two rows for an entity change is sometimes correct (see Special Employee Types, Entity Change). The difference is whether the combined figures make sense or are clearly doubled.

Fix: Review the entity change setup using the Retrospectively Changing Employing Entity guide.

A negative variance means the ATO has been under-informed. Employees will have income statements showing less income than they earned. This is generally the higher-risk direction because it means the employee may under-report income on their tax return (even unintentionally).

Cause 1

Closely Held Employees — Quarterly Lodgement Outstanding

How to spot it: In the Payroll YTD tab, a Closely Held Employee has earnings. In the STP YTD tab, that same employee has lower or zero earnings. Check whether the Q3 or Q4 quarterly lodgement has been submitted.

Why it happens: Closely Held Employees (directors, family members of private companies) are reported quarterly rather than each pay event. If the Q4 (or Q3) quarterly lodgement hasn’t been submitted yet, their STP figures will be behind Payroll YTD. This is expected behaviour up until lodgement.

Fix: Complete the quarterly STP lodgement for the Closely Held Employee to bring their YTD figures current, then refresh the finalisation event. All quarters must be lodged before lodging the EOFY finalisation.

Cause 2

Failed or Partially Successful Pay Events

How to spot it: One or more employees appear in Payroll YTD but have lower earnings in STP YTD. Go to Payroll → Single Touch Payroll and check the event history. Look for events with status “Failed” or “Partially Successful.” The gap in STP figures typically aligns with the pay period of the failed event.

Why it happens: If a pay event fails to transmit successfully, those earnings are never sent to the ATO. If an event is “Partially Successful,” some employees in the event were accepted but others were rejected — the rejected employees have a gap in their STP record.

Fix step-by-step:

• Go to Payroll → Single Touch Payroll → review event history for Failed or Partially Successful events.
• Note which employees were affected and which pay period the failure covers.
• Create an Update Event for the affected employees. The figures will be their current full YTD - this will catch up everything including the missed period.
• Lodge the Update Event.
•  
• Refresh the finalisation event → download updated YTD report → confirm variance is resolved.

Cause 3

Ad Hoc Pay Runs Not Included in the STP Event

How to spot it: Payroll YTD includes earnings from a pay run that was outside the normal pay schedule (e.g., a bonus run, off-cycle correction, termination payout, or one-off payment). The employees from that ad hoc run appear in Payroll YTD but their STP YTD figures are lower than expected.

Why it happens: When a finalisation event is created for a specific pay schedule. The ad hoc pay run was processed but no STP event was ever lodged for it.

Fix: Create an Update Event for the employees Primary Pay Schedule → review that the figures include the ad hoc earnings in the YTD total → lodge → refresh the finalisation event.

Prevention: After processing any ad hoc or off-cycle pay run, always check whether an STP event needs to be lodged for those employees. Do not assume the system automatically includes ad hoc runs in the next scheduled STP event.

Column Reference Table

Manual Drill-Down Method

• Open the STP YTD tab.
• Copy Payroll YTD Column G into a new column in the STP YTD tab. Label it “Payroll YTD Gross.”
• Insert another new column called “Comparison.”
• Enter this formula: =(G4-AE4)-I4
  • G4= STP YTD Total Reportable Gross
  • AE4= Non-Reported Earnings (tax-free allowances, Lump Sum D)
  • I4= Payroll YTD Taxable Earnings
•  
• Non-zero results = rows with a mismatch.
• Sort by the Comparison column to find the largest mismatches first.

These employee types have different reporting rules, different timelines, or different expected outcomes. Always check whether an employee falls into one of these categories before raising a support ticket.

👥 Closely Held Employees

Directors and family members of a private company. Reported quarterly rather than each pay event.

A negative variance at mid-year is normal and expected — their Q3/Q4 lodgements may still be outstanding.

Must be included in the EOFY finalisation event with their full YTD figures after all quarterly lodgements are complete.

Check: Has the Q4 quarterly lodgement been completed before lodging the finalisation?

✈ Working Holiday Makers

Income Type = WHM. Tax rate = 15% on first $45,000, then 30% above that.

Check: Is the income type set to WHM in Payroll → Employee → Tax Details? If yes, the PAYG difference is correct behaviour and no action is needed.

🏢 Entity Change (ABN Change)

An employee who moved between employing entities mid-year will appear on two rows (Same Employee IDs, different entities). Both records are correct.

The Finalisation event will show the employee's total YTD and will not be able to be lodged per entity. 

📋 Terminated Employees

Terminated employees will not show up in the finalisation event as they have already been marked as is final. 

A terminated employee appear in the Downloaded Excel YTD but not on your finalisation event. This is expected as they have been marked as Finalised when the termination payment was done

🌎 Inbound Assignees

Employees assigned to Australia by an overseas entity (Income Type = IAA). Special ATO reporting requirements apply. Tax treaty provisions may affect withholding.

PAYG “variances” for inbound assignees should be reviewed against their specific tax treaty position and the ATO’s inbound assignee reporting rules before assuming misconfiguration.

📞 Labour Hire Workers

Income Type = LHW. PAYG must be withheld regardless of whether the worker quotes an ABN. Special reporting requirements apply.

Labour hire workers should not be reported under SAW (Salary and Wages) — this will cause income type mismatches in ATO records.

Incorrect pay/ deduction category classifications are the most common source of STP variances. Use this table as a reference when reviewing pay category settings.

Ordinary Time Earnings

Leave

Overtime

Allowances

Salary Sacrifice

Termination Payments

An Update Event is the mechanism for correcting previously lodged STP figures. It submits fresh YTD totals to the ATO, replacing whatever was stored previously.

• Go to Payroll → Single Touch Payroll.
• Click Create Event → Update Event.
• Select Financial Year 2025–26.
• Select the employees to correct. For each employee, verify the figures shown are their complete correct YTD totals.
• Click Submit to ATO.
• Return to the finalisation event → Refresh Data → download an updated YTD report → confirm the variance is now resolved.

Some Common questions to ask yourself when checking Variances:

1. What is the total variance amount per employee? (Determines whether this exceeds the $2.00 tolerance)

2. Is the variance positive (STP Payroll) or negative (STP 

3. Which employee(s) are affected? First name + last initial. (Identifies the specific records to examine)
4. Which entity is the employee assigned to? (Confirms correct YTD workbook entity selection)
5. What income type is the employee set to? (Rules out WHM, Closely Held, and Labour Hire scenarios)
6. Does the employee appear on one row or two rows in the STP YTD tab? (Identifies entity change duplicates)
7. Were there any Failed or Partially Successful STP events in the event history? (Rules out failed event scenario)
8. Was the employee paid via an ad hoc or off-cycle pay run during the year? (Rules out ad hoc pay run gap)
9. Is the Pre-Tax (Not classified) column in STP YTD showing any value $0? (Rules out Phase 2 salary sacrifice classification issue)
10. Were any pay/ deduction category classifications changed during the year? (May require a new STP event to pick up changes)
11. Is this employee a Closely Held Employee (director / family member)? If yes, have all quarterly lodgements been completed? (Confirms whether timing variance is expected)

If you have worked through the decision tree, checked all comparison rules, and the variance remains unexplained:

• Run the manual comparison formula =(G4-AE4)-I4 in the STP YTD tab to create a row-by-row comparison for every employee (see the Comparison & Drill-Down Method section). Sort by the Comparison column to surface the largest mismatches first.
• For each row with a non-zero result, filter the Itemised Gross tab to that employee and walk through each classification row against the corresponding STP YTD column using the Column Reference Table in the Comparison & Drill-Down Method section.
• Check whether the affected employee falls into a special category (see Special Employee Types): Closely Held, WHM, Entity Change, Inbound Assignee, Labour Hire. Each has different expected behaviour.
• Review the STP event history for any Failed or Partially Successful events that align with the gap period.
• If the variance still cannot be explained, contact support with all information from the escalation checklist in the Support Escalation Matrix section.

Before contacting support, confirm whether your scenario genuinely requires escalation. Most STP variance issues can be resolved by the employer without a support ticket.

What to include when contacting support

Providing complete information in your first contact significantly reduces resolution time. Include all of the following:

• Employee name (first name + last initial for privacy)
• Entity name / ABN
• Income type assigned to the employee
• Variance amount and direction (positive or negative)
• Which tab and column shows the mismatch
• Financial year
• Whether an Update Event has already been attempted
• A screenshot of the relevant row from the YTD workbook