As the new financial year's tax scales need to apply because the ATO bases PAYG withholding on when income is paid, not when the pay period ends.
Important: Definitiv handles this automatically, provided the payment date is set correctly before the first pay run of the new financial year is published.
How the financial year is determined
The financial year used for tax calculations is established by the payment date of the first published pay run for a given pay period within your organisation.
Warning: Once that first pay run is published, the financial year is locked and cannot be changed. If the wrong payment date was used, you cannot correct it by re-opening or amending that pay run — you will need to create a new, separate pay period with its own payment date.
Examples:
Example 1 — Regular pay run crossing the financial year boundary
A fortnightly pay period of 22 June – 28 June is paid on 2 July 2026.
Pay period | Payment date (first published run) | Financial year established | Tax scales applied |
22 June – 28 June 2026 | 2 July 2026 | 2026–27 | 2026–27 rates |
Even though the pay period falls entirely within June, the payment date of 2 July locks in 2026–27 as the financial year. Any corrections or amendments to this pay period will also be treated as 2026–27.
Example 2 — EOFY adjustment using a separate pay period
If you need to process end-of-financial-year adjustments in 2025–26, for example, to correct earnings or entitlements that belong in the outgoing year, you can open a separate manual pay run with a unique pay period that establishes its own financial year.
A pay period is considered unique when its start and end dates do not match any existing pay period in your organisation.
Pay period | Payment date (first published run) | Financial year established | Tax scales applied |
30 June – 30 June 2026 | 30 June 2026 | 2025–26 | 2025–26 rates |
Because 30 June – 30 June is a unique pay period (separate from the regular fortnightly run), its payment date of 30 June independently establishes it in 2025–26. This allows you to process EOFY adjustments in the correct financial year even when your regular pay cycle pays in July.
Backpay and corrections
When correcting a pay run, the financial year follows the original pay run's payment date and not the date you process the correction.
If the correction needs to sit in a different financial year from the original, create a new, unique pay period with its own payment date. The recommended approach is a Manual Pay Run with the period start and end date both set to a single day, for example, 30 June, to anchor the correction in the right financial year.
Working Holiday Makers
For Working Holiday Maker (WHM) employees, the earnings counted toward the WHM tax threshold are determined by the payment date of the first published pay run containing those earnings, not the pay period end date.
For example, if a WHM employee's pay period ends on 28 June but the payment date is 2 July, those earnings count toward the 2026–27 threshold.
Employment Termination Payments (ETPs)
For Employment Termination Payments (ETPs), the financial year used to apply ETP tax caps and rates is determined by the payment date of the first published pay run containing the termination, consistent with how the ATO treats ETPs.
For example, if a termination is processed in a pay period ending 28 June but the payment date is 2 July, the 2026–27 ETP caps and rates apply. If you need the ETP to fall in 2025–26, the payment date must be on or before 30 June.
What do I need to do?
Nothing. This change is automatic. No configuration is required.
To ensure calculations are correct, make sure the payment date is set accurately before publishing pay runs, particularly for pay periods that cross the end of the financial year, as the payment date on the first published run cannot be overridden retrospectively.
Frequently asked questions
When does this change take effect?
For pay runs with a payment date on or after 1 July 2026. Pay runs published before that date are unaffected.
Will my historical pay runs be recalculated?
No. Historical pay runs are not recalculated. The new behaviour applies to pay runs processed from 1 July 2026 onwards.
What if my payment date and pay period end date are in the same financial year?
If both dates fall within the same financial year, the outcome remains unchanged. The difference only arises for pay periods that cross a financial year boundary.
Can I change the financial year after a pay run has been published?
No. The financial year is locked by the payment date on the first published run for that pay period. To process amounts in a different financial year, you need to create a separate pay period with its own payment date.
How does this affect Working Holiday Maker employees?
The financial year used to determine the applicable WHM tax rate is based on the payment date of the first published run, consistent with all other tax calculations. See the Working Holiday Maker section above for details.
What if I process a late payment for a prior financial year?
If a pay run has a payment date in the current financial year, current-year tax scales will apply — even if the pay period itself was in a prior year. This is consistent with ATO requirements, which tie PAYG withholding to when income is paid, not when it was earned.