Date: 24 September 2026
What’s changing?
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 has removed the special tax treatment for award transport payments. As a result, from 1 October 2026:
- Employers must withhold PAYG from payments that were previously treated as award transport payments.
- Award transport payments will no longer be separately reported in STP as Allowance Type AD.
- These payments must instead be reported under the most appropriate STP allowance category, such as Transport/Fares (T1), Private Vehicle (V1), or another applicable allowance type. [ato.gov.au], [tdv.ato.ac…ato.gov.au]
What employers need to do
Before processing the first pay on or after 1 October 2026, review any allowances currently classified as Award Transport Payments (AD) and determine the appropriate replacement STP reporting category. [ato.gov.au]
Transition Options
The ATO has provided two methods for transitioning STP reporting during the 2026-27 financial year:
1. Cutover Method (Recommended)
- Leave historical YTD award transport amounts unchanged.
- Stop reporting new payments as Allowance Type AD from 1 October 2026.
- Commence reporting under the new allowance classification moving forward.
This is generally the simplest approach and requires no adjustment of previously reported amounts. [ato.gov.au], [sybiz.com]
2. Zeroing Out Method
- Lodge an STP Update Event.
- Reduce the YTD Award Transport Payment (AD) amount to zero.
- Transfer the balance to the new allowance category.
This results in all 2026-27 amounts being reported under the new allowance classification. [ato.gov.au]
Key Dates
📅 1 October 2026
PAYG withholding must commence, and new payments can no longer be reported as Award Transport Payments (AD).
📅 30 June 2027
Employers should have completed their transition away from Allowance Type AD.
📅 1 July 2027
STP reporting that includes Award Transport Payments (AD) for current payments will no longer be accepted. [ato.gov.au]
Action Required
✔ Review payroll allowance settings.
✔ Identify any allowances currently coded as Award Transport Payments (AD).
✔ Determine the correct replacement STP classification.
✔ Update payroll software before the first pay run on or after 1 October 2026.
✔ Consult your payroll software provider for product-specific guidance. [ato.gov.au], [sybiz.com]
Need assistance? Contact our team if you would like help reviewing your payroll setup or implementing these STP reporting changes.
