Hiya @Hinav 👋
Because you've mentioned "wage type" I know you are an SAP payroll customer, as I am an SAP payroll consultant that answers as many payroll questions as I can: both on the SAP WorkZone (which is where you should raise your questions) or here 😉
You must meet the Fair Work Ombudsman payslip requirements to separately identify the components of pay. You cannot pay a bucket of money called "backpay", as per the ATO STP2 Employer Guidance.
Each wage type will have different characteristics: tax, super, reporting and accounting for payroll. Why wouldn't you enter the effective date of the arrears and let SAP payroll automatically calculate all of the correct payments for you? They automate the Lump Sum E reporting and only report at the EOFY, which is in accordance with ATO requirements.
If the arrears pre-dates your SAP payroll go-live, then yes, you will need different wage types. SAP has guidance on how to manage the pre-go-live lump sum arrears payments.
Deanne
Author: KaraATO(Community Support)Community Support 1 Dec 2025
Hi @Hinav - I just wanted to add on some additional info.
For back payments made after 1 July 2025, you'll need to report all amounts as Lump sum E regardless of the amount, since the $1,200 threshold no longer applies. You must report lump sum E year-to-date amounts by specifying each prior financial year to which the amount relates.
In STP Phase 2, you report lump sum E using a single code 'E' but you need to allocate the amounts to the appropriate financial years. You don't need to create separate codes for each of your 250+ wage types when reporting as lump sum E. The system allows you to report one year-to-date value per financial year up to 10 years in arrears.
Here's how it works:
- use lump sum E code 'E' for all back payment amounts that accrued more than 12 months before payment date
- allocate each portion to the correct financial year (for example, Lump sum E 2024 $X, Lump sum E 2023 $Y)
- report the total amount per financial year, not individual wage type breakdowns
- your payroll solution may report lump sum E in each STP report or only when you finalise at year-end - both are acceptable.
You no longer need to provide lump sum E letters to employees since this info will be available on their income statement through ATO online services.
Author: Hinav(Enthusiast)Enthusiast 3 Dec 2025
Hi KaraATO,
Thanks for your response.
- We need to report all disaggregated wage type/code in STP 2 reporting so is that ok to submit the total Lump sum E for back payment related to the previous financial year?
- I need to check with Payroll software how they report Lump sum E automatically at EOFY.
Thanks
Author: Hinav(Enthusiast)Enthusiast 3 Dec 2025
Hi Deanne,
Thanks for your response. SAP will calculating the tax based on financial year dates however how they automate Lump sum E reporting in STP 2 at the EOFY?
Yes, [removed by moderator], SAP has automated Lump Sum E reporting. You enter the retrospective dates for the master data and SAP will automatically calculate everything, write each WT > 12 months to the PASUM table in the cluster. At the EOFY you run MYGL2 LSE option and it creates an override upload file that reverses out the relevant payment types and creates LSE amounts for LSE financial year.
Please ask SAP questions about SAP payroll - the ATO can't help you with product-specific processes 🤓
Deanne
Author: Hinav(Enthusiast)Enthusiast 5 Dec 2025@PayrollDeanne
Thank you so much Deanne for your response. I will check with SAP Payroll provider.
Author: Hinav(Enthusiast)Enthusiast 3 Dec 2025
Hi Deanne,
Thanks for your response. SAP will calculating the tax based on financial year dates however how they automate Lump sum E reporting in STP 2 at the EOFY?
Ask your provider for a copy of the SAP STP2 Implementation Guide. I already explained how it works, in my previous post. Ask your provider to request access for you to the SAP WorkZone. SAP has their resources on there 😉 Deanne
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