Correcting pre-filled PAYG withholding¶

You have reviewed the pre-filled W1 and W2 against your own payroll, and they do not match. Now what? This lesson covers what to do when the pre-filled PAYG withholding figure is wrong — the best way to fix it, and how to make sure the amount you lodge is right.

The short version: the figure you lodge should match what you actually paid your employees and the tax you actually withheld. There are two levers you can pull to get there.

Why this matters¶

If the pre-fill is wrong, lodging it means lodging the wrong amount of wages or withholding. Fixing it properly keeps your Activity Statement in step with your payroll — and keeps your employees' records right too, because the same STP reports that feed the pre-fill also feed what each employee sees at tax time.

What you will learn¶

• Why correcting the underlying payroll report is usually the best fix
• When and how to adjust the W1 and W2 labels
• How to make the figures you lodge match what you paid and withheld

Understanding the concept¶

There are two ways to deal with a wrong pre-fill, and the order matters.

First choice — fix the source. The pre-fill is built from your STP reports. If a report was wrong, the cleanest fix is to correct the underlying payroll so the right amount is reported. The ATO lets you report a correction to your period totals through STP. When you do this as a small or medium withholder, the corrected amount flows into your PAYG withholding pre-fill where it is available. Fixing the source keeps everything lined up — your payroll, the pre-fill, and your employees' records.

Second lever — adjust the label. You can also change the pre-filled W1 and W2 to match your records before you lodge. The ATO says to check the pre-filled amounts and correct W1 and W2 if they do not match your records, reporting the total amounts. This is useful when you need the lodged figure to be right now — for example, a correction has not yet reached the pre-fill.

Whichever lever you use, aim for the same result: the W1 and W2 you lodge should match the wages you actually paid and the tax you actually withheld for the period.

Example¶

Jordan runs a landscaping business. Reviewing the Activity Statement, the pre-filled W2 (tax withheld) looks too low. Jordan digs in and finds the cause: one employee's pay was entered with the wrong tax amount, so the STP report sent the wrong withholding.

Jordan fixes it in two steps. First, the source: the payroll is corrected so the right withholding is reported through STP, which keeps the employee's own records accurate. Second, the label: because the correction has not yet flowed into the pre-fill, Jordan adjusts W2 on the Activity Statement so it matches the true total withheld for the period, then lodges.

The result is that the figure Jordan lodges matches what was actually withheld — and the underlying payroll now tells the same story.

Common mistakes¶

• Only editing the label and never fixing the source — the payroll and payee records stay wrong, and the same error can come back next period.
• Assuming an edit on the Activity Statement flows back into your payroll — it does not; fix the payroll separately.
• Lodging a figure that does not match what you actually paid and withheld.
• Forgetting to report the total amount at each label after a correction.

How this works in myaccountant¶

Key points¶

• The best fix is usually to correct the underlying payroll so the right amount is reported.
• You can also adjust the W1 and W2 labels to match your records before you lodge.
• Report the total amounts at each label.
• Correcting the source keeps your payroll and your employees' records right too.
• The figures you lodge should match what you actually paid and withheld.
• A label edit does not fix the payroll — do both when the source is wrong.

Learn next¶

• Reviewing the pre-filled amounts
• PAYG withholding pre-fill
• The W1 and W2 labels

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