Reconciling PAYG¶

Reconciling PAYG means checking that your PAYG figures agree with each other across all the places they appear. The wages and tax withheld you report on your Activity Statement should match your payroll records, match what you actually paid the Australian Taxation Office (ATO), and line up with your end-of-year Single Touch Payroll (STP) finalisation.

It is a simple habit of comparing numbers that should be the same. When they all agree, you can be confident your figures are right. When one is out, you have found a problem early — while it is still small and easy to fix.

In one line

Reconciling PAYG means checking your W1 and W2 figures agree with your payroll records, what you paid the ATO, and your end-of-year STP finalisation.

Why this matters¶

PAYG figures pass through several records — your payroll, your Activity Statement, your bank payments to the ATO, and your yearly STP finalisation. If a number is wrong in one place, it can quietly stay wrong until year end, when it is harder to trace and fix.

Checking each period as you go means you catch a mistake close to when it happened, while you still remember the pay run it came from. A short check each quarter saves a long hunt at the end of the year.

What you will learn¶

What reconciling PAYG means and which figures need to agree
How to check W1 and W2 against payroll, payments, and STP finalisation
Why reconciling each period and at year end catches errors early

Understanding the concept¶

Your PAYG figures show up in four places, and they should tell the same story.

Your payroll records. Every pay run works out gross wages and the tax withheld. Added up over a period, these are the true totals your other records should match.

Your Activity Statement. You report the gross wages at label W1 and the tax withheld at label W2. These should equal your payroll totals for the same period.

What you paid the ATO. The withheld amount (the W2 total) is money you send to the ATO. What you paid should match what you reported at W2.

Your STP finalisation. At the end of the financial year you make a declaration to the ATO that you have reported all pay information for each employee for the year. The ATO calls this finalising your STP data. Your full-year wages and tax withheld across all your Activity Statements should agree with what your STP finalisation shows.

Reconciling simply means comparing these figures and making sure they agree. The ATO notes that your software and payroll records should be your primary source of data, and that if a figure on your Activity Statement does not match your records, you should correct it to match your records.

The ATO can pre-fill W1 and W2 on your Activity Statement from the pay information you report through STP. That pre-fill is a helpful starting point, but the ATO still expects you to check the pre-filled amounts against your own records before you lodge. Pre-fill and payroll can differ for ordinary reasons — for example, a pay report that has not finished processing yet, or a payment that is outside STP reporting.

For accountants & bookkeepers

Reconciliation spans period-level and year-to-date views. Each activity statement period should tie W1/W2 to the payroll register for that period and to the PAYGW remittance. At year end, the sum of period W1/W2 should agree with the STP year-to-date finalised amounts. The ATO's PAYGW pre-fill draws on STP-reported period totals; update events adjust employee year-to-date figures but do not carry W1/W2 period totals, so they will not move the pre-fill. Where pre-fill and records diverge, the records govern — correct the statement to match. Retrospective STP corrections, unprocessed reports, and out-of-scope payments are common, legitimate causes of a temporary mismatch.

Example¶

Priya runs a small cafe and employs Jordan and Sam. Before she lodges her quarterly Activity Statement, she does a quick reconciliation.

First she adds up the gross wages from her payroll for the quarter — about $40,000. She checks that against W1 on her Activity Statement. They match.

Then she adds up the tax she withheld across the quarter — about $7,000. She checks that against W2. They match too.

She also looks back at the payments she made to the ATO for the quarter and confirms they add up to the same $7,000 she reported at W2.

At the end of the financial year, Priya finalises her STP data. Before she does, she adds up W1 and W2 across all four quarters and compares the totals to what her STP finalisation shows for Jordan and Sam. Everything lines up, so she finalises with confidence. Because she reconciled each quarter along the way, year end is just a final tick — not a scramble to find where a number went wrong.

Common mistakes¶

Lodging the pre-filled W1 and W2 without checking them against payroll — the ATO says your records are the source of truth, so check before you lodge.
Reconciling only at year end, so a small quarter-one error becomes a hard-to-trace year-end problem.
Forgetting to check what you actually paid the ATO against the W2 you reported.
Assuming a pre-fill mismatch is always an error — a report still processing or an out-of-scope payment can explain it.
Skipping the STP finalisation check, so the year-to-date figures never get compared to your Activity Statement totals.

How this works in myaccountant¶

In the app — myaccountant works out the gross wages and tax withheld from your pay runs, then pre-fills the gross wages at W1 and the tax withheld at W2 when you prepare your Activity Statement. It reconciles those W1 and W2 figures against your payroll and flags a mismatch, so you can check and fix it before you lodge rather than after.

Key points¶

Reconciling PAYG means checking your figures agree across all your records.
W1 and W2 should match your payroll totals for the same period.
What you paid the ATO should match the W2 you reported.
Your full-year W1 and W2 should line up with your STP finalisation.
Your payroll records are the source of truth — correct a statement to match them.
Reconciling each period catches errors early, while they are still easy to fix.

Learn next¶

General information only — not tax, super or financial advice.

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