At tax time, many Australians still ask for their “group certificate”. The name is familiar, but the process has changed. For most employees, the document once known as a group certificate is now an online income statement, and it plays an important role in making sure your tax return includes the right income and PAYG withholding details.
For sole traders and business owners, the term can cause even more confusion. You may receive an income statement in some circumstances, but your own business income, drawings, distributions and other payments are not all treated the same way. Understanding the difference can help you avoid rushing a return, overlooking income or relying on incomplete information.
What a group certificate is called now
A group certificate was commonly used to show an employee’s annual pay and the tax withheld by their employer. Its formal name was generally a PAYG payment summary.
For employers reporting through Single Touch Payroll, commonly called STP, that information is now generally made available as an income statement in ATO online services. The ATO describes an income statement as the equivalent of a payment summary, which is why many people still use the term “group certificate”.
This does not mean that payment summaries have disappeared completely. A payment summary may still be provided where payments have not been reported and finalised through STP, or for certain payment types that have separate reporting requirements.
In practical terms, if you are an employee, you may not receive a paper form or email attachment from your employer at EOFY. Instead, you should check whether your income statement is available and ready to use before lodging your return.
What you will see on your income statement
Your income statement brings together employment information reported by your employer. It can show your year-to-date salary and wages, PAYG tax withheld, and superannuation amounts your employer is required to pay for you. It may also separate certain payment components, such as allowances, bonuses, paid leave and salary-sacrifice arrangements, depending on how the employer reports them.
The key status to look for is Tax ready.
During the financial year, an income statement may appear in your account as your employer reports each pay cycle. That information can change as payroll corrections are made. Once the employer completes its end-of-year STP finalisation, the statement should be marked Tax ready, indicating that the employer has told the ATO its reporting for you is complete for that financial year.
You can generally find it by signing in to myGov, opening ATO online services, then selecting Employment and Income statements. A registered tax agent can also access the information needed to prepare your tax return.
An income statement is an important starting point, but it is not your whole tax return. You may still need to include other income, such as bank interest, dividends, investment income, government payments, capital gains, foreign income or income from a side business. You should also consider deductions and tax offsets that apply to your own circumstances.
Why you should wait until the statement is Tax ready
It can be tempting to lodge as soon as the new financial year begins, particularly if your tax return looks pre-filled. However, pre-filled information is not always final information.
The ATO may display STP information in myTax after the end of the financial year even before an employer has finalised it. If the statement says Not tax ready, the ATO recommends waiting until it is finalised before using it to complete your return. If you lodge using unfinalised information and the employer later makes changes, you may need to amend your tax return and could have additional tax to pay.
Most employers are required to make their STP finalisation declaration by 14 July each year, although an employer can seek an extension from the ATO. The finalisation process is what changes the income statement to Tax ready.
Before lodging, take a few minutes to compare the income statement with your own records, including:
- payslips and payroll records
- your employment contract or salary package
- records of bonuses, commissions and allowances
- any salary-sacrifice arrangements
- employment termination documents, if you changed jobs or left employment
- details of other income received during the year.
If something appears wrong, contact your employer first and ask them to review their payroll reporting. Where an employer corrects information after finalisation, they can submit an STP update event. If you have already lodged your return using incorrect information, an amendment may be required. (ato.gov.au)
What sole traders need to know
A sole trader cannot employ themselves. That means you do not issue yourself a group certificate or income statement simply because you take money from the business for personal living costs.
Money you withdraw from a sole trader business is usually referred to as drawings. Drawings are not wages paid to yourself, and they are not a separate deduction for the business. Your taxable result is generally based on the business income you earn, less allowable business deductions, rather than the amount you transfer from the business bank account to your personal account.
As a sole trader, you include your business income and deductions in your individual tax return. There is no separate income tax return for the sole trader business itself.
That said, some sole traders and contractors may receive a business-related income statement or PAYG payment summary. This can occur where tax has been withheld from certain payments, including under a voluntary withholding arrangement, for some labour-hire payments, or because an ABN was not quoted. Those details need to be considered alongside the rest of the business income and expenses in the return.
A contractor should not assume that having an ABN means no tax information needs to be reported or checked. The correct treatment depends on the arrangement, the type of payment, whether tax was withheld and whether the income is business income or personal services income.
Personal services income can apply where income is mainly a reward for an individual’s personal efforts or skills. The rules can affect both reporting and deductions, so this is an area where tailored advice can be particularly valuable.
What business owners need to do for staff, directors and themselves
If you run a company or trust and pay employees, payroll reporting is more than an EOFY task. STP is an ongoing reporting framework for employers, while PAYG withholding requires amounts to be withheld from relevant payments and paid to the ATO. The law specifically requires withholding from salary, wages, commissions, bonuses and allowances paid to an individual as an employee.
At year end, the business needs to ensure its STP information is complete and make a finalisation declaration for each relevant worker. This can include employees, and may also include directors and contractors where applicable. Once finalised, the worker’s income statement can be marked Tax ready.
For a company owner, it is important not to treat every payment from the business as if it were wages. A director may receive salary, wages or directors’ fees, but may also receive dividends, reimbursements, loan advances or other payments. Each category can have different tax, reporting and record-keeping consequences.
Where a company pays salary, wages or directors’ fees, the recipient must include those amounts in their individual tax return. The company or trust paying them generally needs to meet its PAYG withholding, BAS, STP and superannuation obligations.
For this reason, business owners should reconcile payroll records before finalisation rather than treating it as a simple software button to press. Review employee details, gross payments, tax withheld, allowances, salary-sacrifice amounts and any reportable amounts before making the declaration.
A practical tax-time example
Consider a consultant who runs a small sole trader business and also works part-time for another business as an employee.
For the part-time role, the consultant has an income statement showing salary and PAYG tax withheld. They should wait until that statement is Tax ready, then check that it broadly agrees with their payslips before using it in their tax return.
For the consulting business, they do not create a group certificate for themselves. Instead, they gather invoices, bank records, expense receipts, accounting reports and any business-related payment summaries or income statements. The business income and deductions are then reported in the business section of the same individual tax return.
The important point is that employment income and sole trader income can sit in the one tax return, but they are not reported in the same way. Keeping the records separate throughout the year makes the process far easier at EOFY.
A simple checklist before you lodge
Whether you are an employee, sole trader or business owner, it is worth working through the following checks:
- Confirm each employment income statement is marked Tax ready.
- Compare pre-filled information with your own payslips, records and statements.
- Include income from all jobs, side businesses, investments and other relevant sources.
- Check that business income is supported by invoices, accounting records and bank transactions.
- Review deductions carefully and keep records showing what you paid, how the expense relates to earning income and whether you were reimbursed.
- Ask employers or payers to correct information that appears inaccurate.
- Keep tax records for at least five years from the date you lodge your tax return.
The move from paper group certificates to digital income statements has made payroll information more accessible, but it has not removed the need to check it carefully. Employees should use Tax ready income statements as part of their return preparation, while sole traders and business owners need to understand which payments are employment income, business income or something else entirely.
This article is general information only and is not personal financial or tax advice. Your circumstances, business structure and income sources matter. Speak with a registered tax agent or accountant, such as Ample Finance, for advice tailored to your situation.