Answer
In Single Touch Payroll (STP) Phase 2, gross pay is split into separate categories, including a dedicated Overtime amount. Sometimes an amount you meant to be an allowance is reported under Overtime instead. Whether this happens is decided by two tickboxes on the allowance — not by the STP Allowance Category you choose.
Why An Allowance Reports As Overtime
Lightning Payroll only counts an allowance towards the STP Overtime figure when the allowance is both not itemised and not included in super. That is, on the allowance:
- Itemised is unticked, and
- Included In Super Calculations is unticked.
When both are unticked, that allowance is treated as overtime for STP. If the allowance is itemised, it is reported under its own allowance type (including the Other category) and never as overtime. The rest of the STP Overtime figure comes from pay lines paid at an overtime rate and from cashed-out time in lieu, so an itemised allowance will not appear there.
How To Fix It
First work out how the amount was actually entered, because the fix is different for each.
If It Is Set Up As An Allowance
Tick Itemised on the allowance and choose the correct Allowance Category. This moves the amount out of Overtime and into its own itemised allowance for STP. You do not need to redo the pays — use the Retrospective Tool to correct past completed pays:
- Go to Tools >> Retrospective Tool.
- Under What would you like to change? choose Allowances.
- Find the allowance, tick Itemised?, set the correct Allowance Category, and save.
The Retrospective Allowance Editor can change only the description, category and itemised setting — it cannot change the amount, the taxable setting or the super setting.
If It Was Entered As An Overtime Pay Line
If the amount was actually paid on a pay line using an overtime pay rate (flagged as overtime under Employees >> Pay Settings >> Special User-Defined Pay Rates or in a pay rate under Company >> Pay Rate Groups), or as cashed-out time in lieu, the Retrospective Allowance Editor cannot move it. Edit the original completed pay instead: remove the overtime pay line, re-enter the amount as a correctly set-up allowance, and complete the pay again.
Re-Reporting The Correction To The ATO
STP reports year-to-date totals, so you do not resend the old pays individually. Once the amounts are corrected, send your next STP pay event as normal and the corrected year-to-date figures are reported. If the employee has no further pays this year, send an Update Event instead. See What Are The Differences Between a New, Adjust and Update Events?
Please note: overtime and allowances can be treated differently for tax withheld and for super, so reclassifying an amount may change those figures. If you are unsure, check with us or your accountant before changing past pays.
The online (web/mobile) app works the same way — open the Retrospective Tool, choose Allowances under What would you like to change?, and edit the itemised setting and category there. For how allowances are set up, see How Do I Set Up Company-Wide Allowances And Assign Them To Employees?
