What Is a Payment Summary in Australia?

If you’re running payroll for a small business, you’ve probably heard the terms payment summary, PAYG summary, group certificate, and now income statement. It’s a lot to keep up with - especially when you’re focused on looking after your team and keeping the business moving.

In this guide, we’ll explain what a payment summary is, how Single Touch Payroll (STP) changed end-of-year reporting, when you might still need to issue a payment summary, and what you should do each financial year to stay compliant.

We’ll keep things practical and business-focused so you can feel confident about your obligations and avoid last-minute stress at EOFY.

What Is A Payment Summary (PAYG) And Do Employers Still Need To Issue One?

A payment summary - sometimes called a PAYG payment summary, PAYG summary or (historically) a group certificate - is a document employers used to give employees after the end of the financial year. It summarised how much you paid them and how much tax you withheld.

Under the old system, you’d issue a payment summary to each worker by 14 July and lodge a payment summary annual report with the ATO. Employees used these documents to complete their tax returns.

Today, most employers no longer issue payment summaries. That’s because the ATO replaced them with Income Statements delivered through Single Touch Payroll (STP). When you report through STP and “finalise” your payroll at year end, your employees see their Income Statement pre-filled in myGov and their tax agent software.

So the short answer: the PAYG payment summary meaning is historical for most businesses. The modern equivalent is your STP Income Statement finalisation.

Payment Summary Vs Income Statement (STP): What’s Changed For Small Businesses?

STP is an ATO reporting framework where you send payroll data to the ATO each pay run. At the end of the financial year, you complete an STP “finalisation” so the ATO can mark each employee’s Income Statement as “Tax ready”.

Key differences:

• Timing: Instead of reporting once at year end, you report every pay cycle and then finalise by mid-July.
• Access for employees: Employees don’t need a paper or PDF payment summary - they access their Income Statement via myGov or through their registered tax agent.
• Detail: STP Phase 2 breaks out components like gross, overtime, allowances, bonuses and paid leave for clearer ATO reporting.

For most small businesses, STP simplifies EOFY because you don’t have to prepare and distribute separate payment summaries - you just finalise your STP data accurately and on time.

If your payroll has multiple pay types, it helps to understand how Ordinary Time Earnings (OTE) work for superannuation, and how the ATO expects you to classify items like allowances or bonuses. For example, some bonuses may attract super depending on how they’re structured.

What Information Does A Payment Summary Include?

Even though you’re likely using STP, it’s helpful to know what a traditional payment summary captured - because STP finalisation is reporting the same core data:

• Gross payments (salary or wages before tax), including ordinary time and paid leave
• PAYG tax withheld
• Allowances (e.g. travel, meal, tools - itemised under STP Phase 2)
• Lump sum payments (e.g. unused leave on termination) and ETPs (if applicable)
• Reportable employer super contributions (RESC) and reportable fringe benefits (RFBA), where relevant
• Employee details (name, TFN, period employed)

Because employees now rely on the STP Income Statement for their tax, data quality really matters. Make sure you code pay items correctly in your payroll software throughout the year to avoid corrections at EOFY.

Do You Still Need To Provide Payment Summaries? Exceptions And Edge Cases

There are limited scenarios where you might still need to issue payment summaries. These are becoming rare, but it’s worth checking if any apply to you:

1) You’re Not Yet Reporting Via STP

Most employers must report through STP unless you have a specific ATO exemption. If you’re genuinely exempted, you’ll generally still need to provide payment summaries and lodge an annual report.

2) Some “Closely Held” Payees

Closely held payees (e.g. family members or directors paid from a family company) are reportable under STP, but the ATO has provided concessional timing in certain cases. Make sure you confirm your reporting method and due dates if you have closely held payees to avoid accidental non-compliance.

3) Amendments For Prior Years

If you’re amending a pre-STP year or fixing historical data, you may need to reissue a corrected payment summary or correct the annual report. If the year in question was reported via STP, lodge an STP update event or an amended finalisation instead.

If you’re not sure which pathway applies, it’s best to speak with your accountant and ensure your records match what was lodged with the ATO. For background on the terminology shift, see our explainer on group certificates and how reporting has evolved.

End-Of-Year Payroll Checklist For Employers In Australia

Here’s a straightforward EOFY process for most small businesses reporting via STP.

Step 1: Reconcile Your Payroll

• Check year-to-date figures in your payroll software match your bank feeds and accounting records.
• Confirm that gross, tax withheld and super align with your lodgements and payments.
• Review classification of allowances, overtime and leave to ensure they’re mapped to the right STP Phase 2 categories.

Step 2: Review Terminations And Lump Sums

Make sure any termination payments (ETPs) and lump sums (e.g. unused annual leave) are coded correctly. If you’ve had departures close to EOFY, double check final pay calculations and ensure tax treatment is accurate.

Step 3: Confirm Superannuation

• Ensure super guarantee has been paid at the correct rate and by quarterly due dates.
• Cross-check on-costs that relate to OTE, and review whether any bonuses should have attracted super under your arrangements.

Step 4: Finalise STP On Time

Most employers must complete STP finalisation by 14 July each year. Some concessional due dates may apply in limited cases (e.g. certain closely held payees), but aim to complete by mid-July so your employees can lodge their tax returns.

Step 5: Keep Clean Records

Retain payroll, tax and super records for the required period. It’s also wise to think about internal payroll controls and your obligations under data retention laws, especially if you store personal information in HR files or payroll systems.

Legal And Compliance Considerations Connected To Payment Reporting

While payment summaries themselves are largely a thing of the past, the legal obligations that sit around paying staff and reporting to the ATO remain as important as ever. Here are the key compliance areas to keep on your radar.

Fair Work And Awards

If your employees are covered by a modern award or enterprise agreement, check that your pay rates, allowances, loadings, penalties and overtime rules are correct. STP won’t “fix” underpayments - if the inputs are wrong, your reporting will be wrong too.

Employment Contracts And Policies

A clear Employment Contract will help define wages, classification, allowances and leave entitlements - which then flow into your payroll setup. For casuals and part-time staff, the wording around hours and rostering should align with how you actually pay them.

Privacy And Employee Data

Payroll data contains personal information. If you collect, use or store employee details digitally, a tailored Privacy Policy and robust data-handling practices are essential. This goes hand in hand with secure payroll software, limited access permissions and sensible retention periods.

Superannuation

Make sure you’re calculating superannuation on the right base (generally OTE) and at the correct rate. If you pay irregular amounts like allowances or commissions, confirm how they interact with super, as well as how they’re reported under STP Phase 2 classifications.

End Of Employment

When an employee leaves, you’ll need to process final pay, update STP and provide any required documents, like separation certificates where applicable. Getting these right helps you avoid disputes and keeps your reporting clean for year end.

What Employment Documents Should You Have In Place?

Getting your paperwork right at the start makes payroll and reporting much simpler. Consider these core documents and why they matter:

• Employment Contract: Sets out the role, classification, pay, allowances, hours, leave and termination terms so payroll settings are clear and consistent. A well-drafted Employment Contract helps prevent pay disputes and aligns with your award or agreement.
• Workplace Policies: A staff handbook or key policies (e.g. leave, overtime approval, expense claims) supports consistent decision-making and reduces payroll errors.
• Privacy Policy: Explains how you collect, use and store personal information about staff and candidates; a tailored Privacy Policy supports compliance with the Privacy Act.
• Payroll Setup Notes: An internal reference documenting how each pay item is coded in your software (e.g. which items are OTE, which report under STP allowances) helps you train new team members and maintain consistency.
• Termination Checklist: Steps for calculating final pay, unused leave, potential ETPs and STP updates - backed by guidance on calculating final pay so you handle departures smoothly.

If you used to issue paper payment summaries, you might also have a legacy process for year-end communications. You can update that workflow to reflect the STP Income Statement approach - for example, notifying staff when you’ve completed finalisation and reminding them to check their myGov for “Tax ready”.

Common Pitfalls And How To Avoid Them

Even with STP, year-end payroll can be stressful. Here are common issues we see, plus how to stay ahead of them:

• Incorrect STP Mapping: If a pay item is mapped to the wrong STP category, Income Statements may be inaccurate. Review mapping when you add new allowances or change payroll software.
• Late Super Payments: Super paid after the quarterly deadline won’t count towards your tax deduction in that year and may trigger penalties. Automate reminders and reconcile each quarter.
• Underpayments From Misclassification: Misunderstanding award coverage or loadings leads to remediation later. Use your Employment Contract and policies to reflect actual work patterns and confirm award obligations.
• Slipping EOFY Timelines: Aiming for a 14 July finalisation date means you need clean data by early July. Start your reconciliation before 30 June to catch issues early.
• Data Security Gaps: Payroll files often contain TFNs and bank details. Match your storage practices to your data retention and privacy obligations to reduce risk.

FAQs For Employers

What’s a PAYG payment summary called now?

In most cases, it’s been replaced by the employee’s Income Statement, which you generate by finalising STP at EOFY.

Do I still have to give staff a paper summary?

No - not if you’re reporting through STP (which most employers must). Staff access “Tax ready” Income Statements through myGov or via their tax agent.

What’s the due date for finalisation?

Most employers should finalise STP by 14 July. There are limited concessions in specific scenarios (for example certain closely held payees), but aim for mid-July.

What if I made a mistake?

If you discover an error after finalisation, submit a corrected STP update event or amended finalisation as soon as possible so the employee’s Income Statement is accurate.

What about end-of-employment documents?

Handle final pay correctly and issue any required paperwork, including separation certificates where needed. Update STP with the termination date and final amounts.

Key Takeaways

• Payment summaries (also called PAYG summaries or group certificates) have largely been replaced by Income Statements through Single Touch Payroll (STP).
• Your main EOFY obligation is to reconcile payroll and complete STP finalisation - generally by 14 July - so employees see “Tax ready” in myGov.
• Correct classification of pay items, OTE for super and allowances is critical for accurate reporting and compliance.
• Good foundations - a clear Employment Contract, payroll policies and a tailored Privacy Policy - reduce payroll errors and support clean STP data.
• While exceptions exist, most employers no longer need to issue payment summaries; focus on clean year-to-date figures, timely super and on-time finalisation.
• If you’re unsure about edge cases (closely held payees, amendments, ETPs), get advice early so you can finalise without delays.

If you’d like a consultation on setting up your payroll documents and obligations around Income Statements for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.