Award transport payments
Award transport payments previously had different rules compared to other payments. Due to these rules, PAYG withholding was varied to nil for award transport payments paid by employers and they were required to be identified separately in Single Touch Payroll (STP) reporting.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received royal assent on 26 June 2026 and is now law. The Act repeals the specific provisions in tax law relating to award transport payments.
As a result, the variation to nil for award transport payments will end and the way these payments are reported in STP will change.
For amounts that were previously considered award transport payments which are paid on or after 1 October 2026:
- employers must withhold from these payments
- employers no longer specifically identify award transport payments in their STP reporting.
While they will no longer be specifically identified as award transport payments, amounts that were previously considered award transport payments must still be included in STP reporting. Employers should refer to the STP Employer Reporting Guidelines about allowances which relate to transport (in a car, on public transport, or in a different kind of vehicle) to identify the reporting classification that is most appropriate to the allowance they are paying.
Transitioning your STP reporting for 2026–27
As the changes to award transport payments are occurring part-way through the 2026–27 financial year, you will need to take steps to transition your STP reporting. There are 2 methods for transitioning your STP reporting that you can choose from. These are:
- the cutover method, or
- the zeroing out method.
As different payroll solutions operate differently, you should consider which method is most suitable for your product. Your Digital Service Provider (DSP) may provide instructions or guidance about how to transition specific to how your payroll solution works.
Before using either of these methods, you should refer to the STP Employer Reporting Guidelines about allowances which relate to transport (in a car, on public transport, or in a different kind of vehicle) to identify the reporting classification most appropriate to the allowance that you will transition your reporting to.
You must transition your reporting during the 2026–27 financial year because you will not be able to lodge STP reporting that includes award transport payments (allowance type AD) for payments made on or after 1 July 2027.
The cutover method
Using the cutover method means that you will:
- stop including new amounts in your Year to Date (YTD) reporting for award transport payments, and
- start including new amounts in your YTD reporting for the STP reporting classification that is most appropriate to the allowance.
This means that your 2026–27 STP reporting will include amounts reported using both classifications:
- as award transport payments covering the period before you made the transition, and
- for the STP reporting classification that is most appropriate to the allowance covering the period after you make the transition.
You can use this method at any time before you make the first payment to your employees which occurs on or after 1 October 2026.
Example: using the cutover method
Bertie pays his employee Brenda a ‘fares and travel patterns’ allowance of $22 per week under the applicable industrial instrument. He has previously determined that this allowance met the requirements to be considered an award transport payment.
By 30 September 2026, Bertie’s STP reporting for Brenda shows a YTD amount for award transport payments (allowance type AD) of $286 (which is the total of the 13 weekly payments of this allowance).
Bertie chooses to use the cutover method. Bertie also consults the STP Employer Reporting Guidelines and determines that the appropriate reporting classification for this allowance is now other allowances (allowance type OD) with the allowance code V1.
From the first time on or after 1 October 2026 that Bertie pays the fares and travel patterns allowance to Brenda, he:
- stops including the new allowance payments in the YTD amount reported as award transport payments (allowance type AD), and
- starts including the new allowance payments in the YTD amount reported as other allowances with the allowance code V1.
By the end of the 2026–27 financial year, Bertie’s STP reporting for Brenda includes the whole amount of the fares and travel patterns allowance paid throughout the year ($1,144) split between the 2 reporting classifications:
- $286 reported as award transport payments (allowance type AD) before 1 October 2026, and
- $858 reported as other allowances with the allowance code V1 during the rest of the year.
The zeroing out method
Using the zeroing out method means that you lodge an STP Update Event to change the STP reporting classification of the award transport payments you have reported before you make the transition. This Update Event must:
- zero out the YTD amount for award transport payments (allowance type AD)
- increase the YTD amount for the STP reporting classification most appropriate to the allowance by the amount which was previously shown as award transport payments.
This means your 2026–27 STP reporting will only show amounts reported for the STP reporting classification that is most appropriate to the allowance covering the entire financial year. Your reporting for award transport payments (allowance type AD) will show $0 (or nothing at all).
You can use this method at any time before 31 December 2026, but:
- if you are using this method after 1 October 2026, you must ensure that you are able to withhold correctly from these allowances from that date
- if you cannot ensure that you are withholding correctly after 1 October 2026 without making the transition, you must transition by using the zeroing out method before 1 October 2026 or using the cutover method.
Example: using the zeroing out method
Gertie pays her employee Brendan a ‘fares and travel patterns’ allowance of $22 per week under the applicable industrial instrument. She has previously determined that this allowance met the requirements to be considered an award transport payment.
By 30 September 2026, Gertie’s STP reporting for Brendan shows a YTD amount for award transport payments (allowance type AD) of $286 (which is the total of the 13 weekly payments of this allowance).
Gertie chooses to use the zeroing out method. Gertie also consults the STP Employer Reporting Guidelines and determines that the appropriate reporting classification for this allowance is now other allowances (allowance type OD) with the allowance code V1.
Before making her first payment to Brendan on or after 1 October 2026, Gertie lodges an Update Event which:
- zeroes out the YTD amount for award transport payments (allowance type AD) – the YTD amount is now $0
- increases the YTD amount for other allowances with the allowance code V1 by $286; as Gertie has not paid any other allowance with this reporting classification, the YTD amount is now $286.
From the first time on or after 1 October 2026 that Gertie pays the fares and travel patterns allowance to Brendan, she starts including the new allowance payments in the YTD amount reported as other allowances with the allowance code V1. After the first post-1 October 2026 payment, the YTD amount is now $308.
By the end of the 2026–27 financial year, Gertie’s STP reporting for Brendan includes the whole amount of the fares and travel patterns allowance paid throughout the year ($1,144) reported as other allowances with the allowance code V1.
End of example