What to do when payroll goes wrong¶

Everyone who runs payroll makes a mistake at some point. A pay is wrong, the wrong amount of tax comes out, or a report does not go through. It happens, and it is not a disaster. Almost every payroll mistake can be fixed.

The trick is to have a calm, simple order of steps to follow. This lesson gives you that order. The rest of this module then walks through the most common problems one by one.

In one line

Don't panic — work out what happened, fix it promptly, correct what was reported to the ATO, tell the employee if they are affected, and keep a record.

Why this matters¶

When a pay looks wrong, it is easy to feel stuck or worried. But payroll is built to be corrected. Tax, super and pay reporting all have normal ways to put a mistake right. Knowing the general approach means you can act with confidence instead of freezing or making things worse.

What you will learn¶

Why most payroll mistakes can be fixed
The simple order of steps to follow when something goes wrong
Why fixing and re-reporting is a normal part of payroll

Understanding the concept¶

When something goes wrong with a pay, it helps to follow the same five steps every time.

1. Work out what happened. Look at the pay and your records to see exactly what went wrong. Was the pay too high or too low? Was the wrong tax taken out? Did a report fail to send? You cannot fix a problem until you know what it is.

2. Fix it promptly. Once you know the cause, put it right. Australian Taxation Office (ATO) guidance is that once you spot a mistake that needs correcting, you should act on it straight away. The longer a mistake sits, the more pays it can affect.

3. Correct what was reported to the ATO. Each time you run a pay, the details are sent to the ATO through Single Touch Payroll (STP) — the system that reports pay, tax and super to the ATO. If a pay was wrong, the report was wrong too, so the corrected figures need to be reported. The good news is that STP is designed for this, and a later report can correct an earlier one.

4. Tell the employee if they are affected. If a person was paid too much or too little, or their payslip was wrong, let them know what happened and how you have fixed it. Fair Work guidance is to explain the mistake and how it was put right.

5. Keep a record. Write down what went wrong, when you found it, and what you did to fix it. Fair Work rules require pay and time records to be kept, and you can fix a mistake as long as you also record the error and the reason for the fix.

Not every problem needs all five steps. A small report hiccup may just need step one and two. But keeping the order in mind means you never miss the part that matters — usually telling the employee or correcting the ATO report.

For accountants & bookkeepers

The ATO expects corrections to be actioned promptly once identified, and most year-to-date corrections can be made in the next pay event or an update event within the same financial year where the employee has continuity of employment. Employer-level totals also flow through to activity-statement reporting. Fair Work requires time-and-wages records to be kept for seven years, accurate and legible, with a note of any correction and the reason for it.

Example¶

Priya runs a small cafe and pays her staff weekly. One Friday she notices that a team member was paid for 30 hours when they only worked 25. She does not panic. She works out what happened (five extra hours were entered by mistake), fixes it in the next pay, and the corrected figures are reported to the ATO through STP. She has a quiet word with the team member to explain, and she jots a note in her records about the error and the fix. The whole thing takes a few minutes, and nothing is left hanging.

Common mistakes¶

Panicking and doing nothing — most payroll problems get easier to fix the sooner you act, not harder.
Fixing the pay but forgetting the report — the ATO still has the old figures until a corrected report is sent through STP.
Not telling the employee — people notice pay changes, and a quick explanation avoids worry and questions later.
Keeping no record — without a note of what happened, the same mistake is easy to repeat and hard to explain.

How this works in myaccountant¶

In the app — when you run a pay run, myaccountant reports the pay, tax and super to the ATO through STP for you. If a pay was wrong, you can adjust or re-do it, and the corrected figures are reported through STP. Because STP carries year-to-date totals, a later report can correct an earlier one. You can see the lodgement status of each report, so you always know whether it went through.

Key points¶

Most payroll mistakes can be fixed — try not to panic.
Follow the same order every time: work out what happened, fix it, correct the report, tell the employee, keep a record.
Act promptly once you spot a mistake.
STP is designed so a later report can correct an earlier one.
Always keep a note of what went wrong and how you fixed it.

Learn next¶

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

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