Hello, since interests paid on back payments are excluded from PAYG withholding and STP reporting, how should an employer pay the interest component of a back payment? Does it have to be done through payroll itself (separate from STP)?
And is it correct that the employee should report this interest in the same section as they would for savings account interest?
Many thanks.
Hiya @Miksha 👋
In payroll, you set up the various pay codes for tax, super and reporting purposes (along with many other requirements). It's easy to pay it via payroll by setting up the Interest on arrears payment code as no PAYGW, no SG and no reporting.
The taxpayer reports it in their tax return as per the ATO guidance.
Deanne
Hiya @Miksha 👋
In payroll, you set up the various pay codes for tax, super and reporting purposes (along with many other requirements). It's easy to pay it via payroll by setting up the Interest on arrears payment code as no PAYGW, no SG and no reporting.
The taxpayer reports it in their tax return as per the ATO guidance.
Deanne
15 Apr 2026 · 4 min read time
16 July 2025 · 5 min read time
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