Correcting PAYG withholding¶

Your Business Activity Statement (BAS) reports two figures about the pay you give staff. The Australian Taxation Office (ATO) calls them W1 and W2. W1 is the total gross wages and similar payments you made in the period. W2 is the total tax you held back from those payments and sent to the ATO.

If one of these turns out wrong after you have lodged, you fix it by revising the original statement. And where the mistake is about wages, there is a second step — you also correct the Single Touch Payroll report behind it. This lesson walks through both.

In one line

To fix a wrong W1 or W2 you revise the original statement — and for wages you also correct the Single Touch Payroll report so the right amount is on record.

Why this matters¶

W1 and W2 feed the ATO's records for both your business and your staff. If they are wrong, your business figures are off and your employees' year-end tax information can be wrong too. Fixing both the statement and the payroll report keeps everyone's records matching what really happened.

What you will learn¶

What the W1 and W2 labels report
How to fix a wrong W1 or W2 by revising the original statement
How to correct the underlying Single Touch Payroll report for wages

Understanding the concept¶

W1 is the total gross salary, wages and similar payments you made in the period — the amounts before tax was taken out. W2 is the total you withheld from those payments as pay as you go (PAYG) withholding and sent to the ATO.

The golden rule is that these should match reality: the wages you report should match what you actually paid, and the withholding you report should match what you actually held back. When they do not, there are two things to put right.

Fix the statement. To correct a wrong W1 or W2 on a BAS you have already lodged, you revise that original statement — you lodge a corrected version showing the right figures for that period.

Fix the payroll report too (for wages). Wages are also reported to the ATO through Single Touch Payroll (STP) — the system that sends each employee's pay and withholding to the ATO every time you pay them. If the wages or withholding were wrong, you correct the STP report as well, so the ATO's record of what each employee was paid is right. The ATO uses your STP reports to help fill in W1 and W2, which is exactly why both need to line up.

For accountants & bookkeepers

The ATO offers two routes for a PAYG withholding correction reported through STP: revise the Activity Statement for the earlier period to the correct amount, or carry the correction forward to the current period, subject to limits. Where the figures were overstated, a revised statement is generally required. Correct the STP report (for example via an update event and, where relevant, a finalisation) so the payee's income information reflects what was actually paid and withheld.

Example¶

Sam runs a small landscaping business with three employees. After lodging last quarter's BAS, Sam realises the W2 figure was too high — the withholding was overstated, so the statement shows more tax held back than Sam actually withheld from staff pay.

Sam does two things. First, Sam revises the original statement so W2 shows the correct amount for that quarter. Second, because this is about wages, Sam corrects the Single Touch Payroll report for the affected pays, so each employee's reported withholding matches what was really taken out. Now the statement and the payroll record tell the same, true story.

Common mistakes¶

Fixing the statement but not the Single Touch Payroll report — the two then disagree, and staff records stay wrong.
Treating W1 and W2 as the same thing — W1 is the wages, W2 is the tax withheld.
Reporting figures that do not match what was actually paid and withheld.

How this works in myaccountant¶

In the app — myaccountant lets you revise a lodged statement to correct W1 or W2, and it draws those figures from your payroll. When you fix the underlying pay details, you can send a corrected Single Touch Payroll report so the wages and withholding on record match what you actually paid.

Key points¶

W1 is total gross wages; W2 is the tax you withheld from them.
Reported wages and withholding should match what you actually paid and withheld.
Fix a wrong W1 or W2 by revising the original statement.
For wages, also correct the Single Touch Payroll report behind it.
The ATO uses your Single Touch Payroll reports to help fill in W1 and W2.
Fixing both keeps your figures and your employees' records matching.

Learn next¶

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

Did this answer your question?