Why the ATO Sees the Mismatch Before You Do
Single Touch Payroll sends wage and withholding data to the ATO every pay cycle. The BAS reports PAYG withholding at W1 and W2 each quarter. The ATO holds both datasets and compares them automatically. When the figures reported through STP do not reconcile to what was declared on the BAS for the same period, the system flags it. That flag is what generates the compliance letter most employers do not expect.
The mismatch itself usually comes from one of three places. The first is timing. STP data is reported on or before each payday, so figures accumulate across the quarter in real time. The BAS is prepared later, often from a payroll summary or the accounting software's PAYG withholding report. If those two sources are pulling from different data points or if a pay run was processed outside the normal cycle, the quarter-end totals will not match even though both are technically correct in their own system.
The second source is a payroll correction made after a pay event was submitted to the ATO. If wages or withholding are amended in the payroll software after the STP submission, and the correction is not pushed to the ATO through an adjustment event, the STP record and the actual payroll ledger are out of sync. The BAS then reflects the corrected figures but the ATO's STP data still shows the original ones.
The third is switching payroll software mid-year. Year-to-date figures can be duplicated or dropped entirely during migration, and the STP data sent to the ATO after the switch may not carry across the correct cumulative totals from the old system.
How to Identify the Gap Before Lodging
The pre-BAS check that catches most mismatches is straightforward. Pull the PAYG withholding report from the payroll software for the quarter and compare it to the W1 figure you are about to lodge on the BAS. If they do not match, the next step is to pull the STP year-to-date report from the payroll software and compare it to the ATO's prefill data in Online Services for Agents. The ATO's prefill for W1 and W2 draws directly from the STP submissions received to date. If the prefill figure differs from the payroll report, the STP record has not been updated to reflect what was actually paid.
For firms managing clients with manual adjustments or out-of-cycle pay runs, checking whether those runs were submitted through STP before the quarter closes prevents the mismatch from reaching the BAS at all. The ATO expects STP corrections to be lodged within 14 days of identifying the error, or included in the next regular pay event for an employee still in continuous employment.
How to Fix Both Records When They Are Already Out of Sync
Fixing a PAYG mismatch requires correcting both sides. The STP record and the BAS need to reflect the same figures for the same period.
On the STP side, the correction method depends on what went wrong. A payroll error affecting an employee's year-to-date figures is corrected through an update event. An error in the employer-level gross payment or withholding totals is corrected through an adjustment event. The ATO's guidance is clear that correcting the STP record alone is not enough. Where an adjustment changes the withholding amount for a period already reported on a BAS, the BAS for that period must also be revised.
On the BAS side, if the mismatch has already been lodged, the fix is a revised activity statement for the affected period. Registered BAS agents can lodge revisions through Online Services for Agents or the Practitioner Lodgment Service. If the revision increases the PAYG withholding liability, the ATO treats it as a voluntary disclosure, which reduces any penalties or interest that apply.
The Takeaway
A STP and BAS mismatch is not a difficult problem, but it has to be fixed in both systems to actually resolve it. Correcting one side and leaving the other creates a new discrepancy. The practical prevention is a quarterly reconciliation before lodgement: compare the payroll software's withholding report to the STP year-to-date data and to the W1 figure going on the BAS. If all three match, the quarter is clean. If any two do not, find the reason before lodging rather than after receiving a letter from the ATO asking the same question.
