What an exciting time of year! It's so much more enjoyable now as this is the first time businesses will be processing end of financial year through STP. So we know there will be lots of questions and have compiled this guide as a result. We will keep adding to this so make sure you refer here first if you have a question!
This should be read in conjunction with the EOFY using STP Guide.
Section 1: New configuration settings/features
Closely Held Employees
Information pertaining to closely held employees, including how to classify an employee as closely held can be found here. It is important to note that we are unable to provide legal advice on whether any of your employees fall within the ATO's definition of closely held. Rather, you must speak with your accountant, solicitor or the ATO themselves if you need clarification on this.
If ALL employees in the business are deemed to be closely held and you make the decision to delay reporting until the 20/21 financial year then you are not required to enable STP and report STP events (simply because there is nothing to report). Once you employ a new employee and they are not deemed closely held then you MUST commence reporting through STP for that 1 employee.
Reportable Fringe Benefits and separate cap for salary packaged entertainment benefits
Employers exempt from fringe benefits tax under section 57A of the Fringe Benefits Tax Assessment Act that have configured their business setting accordingly are now provided an additional setting. This setting deals with separating entertainment related fringe benefits from other fringe benefit amounts. Specifically, a separate single grossed up cap of $5,000 applies to fringe benefits that are salary packaged meal entertainment and entertainment facility leasing expenses. As part of STP reporting, the data transmitted to the ATO separates reportable fringe benefits amounts into exempt and non-exempt amounts. As such, if employees are eligible for this separate cap, you must configure the business accordingly to allow separate reporting of RFB amounts.
Instructions on how to do this can be found here. If you have eligible employees entitled to the seperate cap that do not take advantage of it, you can decide whether or not to apply the setting.
Student and Training Support Loans (STSL)
Employees completing a Tax File Declaration Form have to specify what loans (if any) they have. These loans include:
- Higher Education Loan Program (HELP);
- Student Start-up Loan (SSL);
- Trade Support Loan (TSL);
- Student Financial Supplement Scheme (SFSS).
Up until recently, HELP, SSL and TSL were 'lumped in' as HELP and SFSS was a separate amount with a separate tax calculation. From 1 July 2019, HELP, SSL, TSL and SFSS will all be consolidated under one name - Study and Training Support Loan (STSL) - and one tax table. This change applies to all new and existing employees.
It goes without saying that we have updated all tax tables, including STSL. Other than that, how is this change reflected in the payroll platform?
Firstly, the pay run screen. As you would know, the Withheld Amounts column in the pay run is broken down into PAYG, SFSS and HELP:
However, for all pay runs with a date paid on or after 1 July 2019, the Withheld Amounts column in the pay run will be broken down into PAYG and STSL, with STSL combining the SFSS and HELP amounts:
Secondly, payroll reports. Depending on the date range used to generate the report, the withheld amounts will be itemised differently. Specifically, any report generated with a date range:
- of 18/19 FY or earlier will display the SFSS and HELP columns;
- of 19/20 FY and thereafter will only display the STSL column;
- spanning across the 18/19 FY and 19/20 FY will display both the SFSS and HELP columns, but the amounts will be consolidated and only display in the HELP column.
Lastly, pay slips. Pay slips relating to pay runs with a date paid on or after 1 July 2019 will reflect the STSL amount only.
The ATO has updated the Tax File Number Declaration Form to reflect this change. The latest version of the TFN Declaration Form is dated June 2019. A copy of the form can be downloaded here.
Question 10 will now combine both questions for HELP & SFSS debts-
We will be making changes to the payroll platform to reflect the one setting for all study and training loans. Until this change has been released we recommend for any new employees (or changes to existing employees) with any type of study or training loan, you tick the HELP option in the Tax Calculation Options on the Tax File Declaration page.
Section 2: Prep recommendations before commencing finalisation event
Ensure Allowances are set up correctly
The introduction of STP brought about a reclassification of allowances. As such, you should ensure that all allowance pay categories have been assigned the correct Payment Summary Classification. Detailed instructions on classifying allowances can be found here.
Please note: If the allowance's Payment Summary Classification was set up incorrectly, it only needs to be fixed at the pay category level, not on a per individual employee basis.
It is absolutely essential that Reportable Employer Super Contributions (RESC), otherwise known as Salary Sacrifice Super, is setup correctly. The ramifications of this is that employee YTD amounts will be incorrect when reporting to the ATO and the employee may be requested to pay money to the ATO. As such, we strongly suggest you conduct an audit of RESC payments recorded for the financial year.
The easiest way to do this is as follows:
- Generate a Deductions Report for the 18/19 FY and filter using the relevant RESC deduction category;
- Generate a Super Contributions Report for the 18/19 FY and filter the Contribution Type to Salary Sacrifice;
- Compare the total $ amounts between both reports. Do they match? If yes, you're all good. If they don't match, identify where the differences lie.
- Once the differences are identified, you will need to fix them and the way to fix them depends on whether the amount comes from Opening Balances or from within a pay run. Instructions on how to fix the differences are detailed below.
- Generate the Super Contributions Report again and ensure the total amount matches the Deductions Report.
Fixing RESC amounts incorrectly entered via an Employee's Opening Balance
Firstly, you will know the issue stems from the opening balance amount because the Deductions Report will say as much under the employee name, for example:
To rectify this, go to the employee's file and click on Opening Balances (left nav menu) > Deductions tab. Tick the "Include on payment summary as RESC" checkbox and then click on 'Save'.
Fixing RESC amounts incorrectly entered via a Pay Run
It will be evident the issue stems from what has been entered in a pay run because the Deductions Report will list the pay schedule and the date paid under the employee name, for example:
What this looks like in a pay run is as follows:
You can see that the deduction is set up as a manual payment. Rather, it should be set up to be paid to the super fund, for example:
To rectify this, you will need to create an empty pay run, reverse the incorrect entry (ie add the deduction line and have it set to 'Manual Payment' with a negative figure). Then add the correct entry (ie add the deduction line and have it set to be paid to the super fund with a positive figure). An example of how this will look is as follows:
Fixing RESC amounts incorrectly set up via Pay Run Inclusions
If you have had to fix RESC errors, best practice is to ensure it doesn't keep happening on an ongoing basis! So, you should generate a Pay Run Inclusions report to review any ongoing RESC deductions set up for any employee. You will know an employee's pay run inclusion needs fixing if the deduction category is not set to be paid to a super fund.
For example, this RESC deduction set up is incorrect:
This RESC deduction setting is correct:
Instructions on how to configure employee pay run inclusions can be found here.
Finalise pay runs
Put simply, if a pay run is not finalised it will not be reported to the ATO. If you lodge your finalisation event before finalising all pay runs for the 18/19 FY you will then need to lodge an amended finalisation event so that the correct figures are reported to the ATO. This includes normal pay runs and ad hoc pay runs - again if it relates to an employe's pay or is an adjustment to an employee's pay it must be finalised in order to be reported via STP.
Do all pay events need to be successfully lodged with the ATO before commencing the finalisation process? There are some events that are currently in a failed or submitted status.
Best practice is that you ensure all pay events are successfully lodged before lodging subsequent events but this has been the first year reporting STP so the ATO have not been overly strict on this. From the 19/20 financial year, we do strongly suggest you follow best practice.
However, for the purpose of lodging the finalisation event, it does not matter if all prior pay/update events have not been successfully lodged. This is because the earnings that are reported come from finalised pay runs as opposed to just successfully lodged STP events.
Section 3: Payment Summaries vs Finalisation Event
The general rule here is if you have lodged STP events you MUST lodge a finalisation event and MUST NOT lodge payment summaries. Doing both will cause a duplication of data to be reported to the ATO and then you will need to deal with the ATO and explain/rectify the issue. The only exemptions to this rule are detailed here.
N.B. Businesses that have reported STP events, whether successful or partially successful, will notice that the payment summary generation function is disabled. This is intentional and purely to ensure users do not lodge payment summaries AND lodge STP events. The repercussion of this is not easy to solve and requires ATO intervention, so better to be on the safe side! If you believe you meet any of the exemptions provided in the above article link then email payroll support.
Below are some specific scenarios asked by users that may be relevant to you:
We only started reporting STP mid year. Do we still need to process a finalisation event?
Once you start reporting successfully through STP, you can't stop! You must also complete a finalisation event and NOT generate payment summaries/payment summary annual report (PSAR) as payroll data will be overstated to the ATO.
Don't forget that STP events are reporting YTD payroll data. So if, for example, a business only started reporting through STP from February 2019 (but was processing pays from the start of the FY) that first event included the YTD payroll data for each employee in the event. This means that all payroll data from 1 July for the employee was captured in the first event lodged. What you need to be aware of though is that pay events only include employees who were paid in the pay run you are lodging.
There may be some employees paid from the start of the financial year who have not been paid since the business started lodging through STP. To ensure you capture all employee data, you should create and lodge an update event prior to completing the finalisation event. The update event will capture ALL employees paid in the financial year (who have not previously been marked as 'is final' in an event). Once successfully completed, you will then be in a position to process your finalisation event.
We have NOT been reporting through STP during the financial year but want to process a finalisation event (ie STP end of year process). Is this possible or do we need to lodge an STP event first before lodging a finalisation event?
If you prefer to use the STP end of year process and lodge a finalisation event rather than issue payment summaries you can definitely do this. Additionally, you do not need to lodge an STP event before lodging a finalisation event. So long as you have registered for STP and have finalised pay runs for the financial year you can lodge a finalisation event.
If you decide to do this, DO NOT also issue payment summaries and lodge a PSAR with the ATO as your payroll data will be over reported.
We only started reporting STP mid year and had previously processed termination pays. Will the terminated employees appear in the finalisation event?
Yes they will. The only exception here would be if you have successfully lodged an update event during the financial year and prior to the finalisation Event - as terminated employees would have been included in the update event and marked as 'is final'. If this is the case then the previously terminated employees will not appear in the finalisation Event (nor will any other employees previously marked as 'is final' in successful lodgements). But that is ok! As soon as an event is lodged and an employee is marked as 'is final' you're communicating to the ATO that this is the final payment being made to the employee for that financial year - by doing this you have basically conducted a finalisation event for that employee.
With these terminated employees as they have been encompassed in STP events (whether via an update event or finalisation event), you must not generate payment summaries/PSAR for them as the payroll data will be overstated to the ATO.
We changed payroll systems during the financial year and have not added previously terminated employees (from prior payroll system) in this payroll system. How do we deal with the terminated employees not entered in this payroll system?
So the first thing that needs to be considered here is whether the business was reporting through STP in the previous payroll system.
Scenario 1: Reporting through STP was occurring in previous payroll system
If this is the case you need to ensure the employees' final STP event in the previous payroll system included these employees and were marked as 'is final'. This acts as an indicator to the ATO that there are no further payments to be made to that employee for the remainder of the financial year. So if that was done then there is nothing further required for you to do with these employees - their finalisation event has occurred. If this has not been done, then lodge an update event in the previous payroll system for those terminated employees and mark as 'is final'. Also, please note that as you have been reporting through STP in the previous payroll system you must not add the terminated employees in this payroll system and include opening balances as this will duplicate the reporting of payroll data for the terminated employees. You must finalise the process for those terminated employees in the previous payroll system.
Scenario 2: Reporting through STP was NOT occurring in previous payroll system
If this is the case and you only commenced STP reporting in this payroll system then there are a few ways to deal with this:
- Option 1: Keep the terminated employee data in the previous payroll system and generate payment summaries/PSAR for such employees; or
- Option 2: Add terminated employee data in this payroll system and enter their YTD data via the Opening Balances functionality so that they are then included in the finalisation event. If you choose this option then you are not required to generate payment summaries/PSAR for the terminated employees.
Changing payroll systems during the financial year... in general
There are so many variables with this topic and different scenarios that need to be considered here. As such, if your exact scenario has not been discussed above, please refer to this article to get a better understanding and resolution to your specific situation.
Are we no longer required by the ATO keep a record of payment summary details?
Please be aware that all historic payment summary records for employees, ie for all financial years prior to 18/19 are automatically retained in the payroll system. There are no back ups required to obtain a copy of this data - it just exists in the platform. You have the ability to continuously access previously published payment summaries and ETP summaries at an employee level (via the employee's Payment Summaries screen) or at a business level (via the Reports > Payment Summaries screen).
Additionally, employees are still able to access historic payment summaries via their employee portal.
I have employees who still want a printed payment summary. Is it as simple as just printing it out?
Put simply, employees should not be issued payment summaries, even if they beg you for one! They need to be advised rather that they will now be provided with Income Statements and they will be available via their myGov account. This is a significant change to what employees are used to so it may be worth communicating with your employees in advance to let them know what the changes are.
Another reason for not issuing payment summaries if you have been reporting through STP is the fact that different payroll configurations apply for STP reporting businesses and non-STP reporting businesses. If your settings are configured to be STP compliant, this may then affect what data is displayed in a payment summary. The last thing you want to do is issue a payment summary with incorrect figures or figures varying to the employee's Income Statement!
Section 4: Lodging your Finalisation Event
What if an update event has been successfully lodged and all employees marked as 'is final'? Is this sufficient as a finalisation event or does a finalisation event need to be lodged again via the STP EOFY Wizard?
Having lodged an update event with all employees marked as 'is final' is definitely sufficient as having closed off your payroll year end with the ATO. To clarify, the STP EOFY Wizard is NOT the only way of lodging a finalisation event - we have merely created this feature to provide a simple step by step process on how to lodge a finalisation event.
If you do not want to use or wait for the release of the STP EOFY Wizard, you can simply create and lodge an update event and this will be your equivalent finalisation event. We recommend you closely follow the instructions to ensure correct end of year steps have been followed.
Employees are normally paid on a monthly pay schedule but sometimes they have been paid using an adhoc pay schedule (for out of process adjustments). Do we need to process a finalisation event for both the monthly pay schedule and the adhoc pay schedule?
The answer here is No. When you assign a pay schedule to the finalisation event, it picks up all active employees (that is, employees not marked as 'is final' in prior events) who have that pay schedule assigned as their primary pay schedule (as per the configuration in the employee's Pay Run Defaults page). The employee's total YTD earnings for that financial year will appear in the event. This includes earnings paid using a different pay schedule during the financial year. We strongly suggest however that you check no employees are assigned to any adhoc pay schedules otherwise they will be missed when reporting finalisation events. If you do have employees assigned to any adhoc pay schedules you will either (a) need to process a finalisation event for that pay schedule or (b) reassign to a different pay schedule. Ensure you perform this audit before you commence processing any finalisation events.
I am unable to publish an employee's proceed from the 'Confirm Payroll Data' step. I am being asked to correct all validation warnings before continuing to the next step.
So yes, this will happen if there are validation warnings that have not been corrected. We have enforced this practice to avoid failed lodgements with the ATO. When completing the finalisation event process, the payroll data and company details will be validated at the 'Confirm Payroll Data' step and any warnings will display at this stage. A list of possible validation warnings can be found here.
You are required to action all warnings before you can proceed. Once actioned, return to the 'Confirm Payroll Data' screen and click on Actions > Refresh Data. All warnings will disappear if they have been actioned correctly.
What happens with closely held employees in the finalisation event? Are they left out of the event?
No they are not. If you have marked an employee as closely held, that employee will still be added to the finalisation event. The reason for this is that the reporting exemption of closely held employees commences from the 19/20 FY.
Once a finalisation event is successfully lodged with the ATO, will the status in the employee's myGov account change to 'Tax ready'?
Yes it will. A such, if you notice that an employee's pay needs to be adjustment after lodging the finalisation event you must action this immediately so that the employee does not use 'outdated' data to lodge their tax return.
Can I still create an urgent adhoc pay run after lodging a finalisation event? If yes, how is this done using the STP EOFY Wizard?
Yes, you can. However, bear in mind that the successful finalisation event would have marked the employee's Income Statement as 'Tax ready' so you must notify the employee immediately that an adjusted pay is required and to hold off on lodging their tax return. If this is not done prior to an amendment taking place and they lodge their tax return there will be implications for the employee.
Once you have finalised the adhoc pay run, go to Reporting > Single Touch Payroll. From this screen, click on the dropdown arrow to the right of the 'Start Finalisation Process' button and then click on 'Create an amended Finalisation Event':
N.B. This option will only appear once a successful finalisation event has been lodged with the ATO.
From there, you will be directed to enter the applicable pay schedule and then add the effected employees. You can select all employees or just the specific employees affected.
The Amendment Employees are made up of all active and terminated employees assigned to that specific pay schedule that have a start date earlier than 1 July 2019. Once you proceed to next screen, the process will mirror that of a finalisation event.
What is contained in the notification email sent to employees once the finalisation even has been lodged successfully?
Users can choose to send out the system generated notification email once the finalisation event has been successfully lodged. To do this, click on Actions > Send Notifications (which is located within the successful finalisation event). The email contains the following text:
"Your income statement for [Employing Entity Name] for the financial year ending June 30, 2019 is now available.
You can access your income statement via ATO online services through your myGov account. If you do not already have a myGov account, it is easy to create. Click here for instructions on how to do this.
To clarify, an income statement is different to a payment summary. We are no longer required to provide you with a payment summary as we have been reporting your payroll data for the financial year through Single Touch Payroll (STP).
Other general information regarding how STP has changed the end of year process can be found here."
This text is fixed and cannot be configured by users.
Can we print the Income Statements for employees who do not have an email address?
First thing to note here is the notification email sent to employees does NOT include a copy of their Income Statement. The email simply advises the employee that their Income Statement is now available and how they can access it.
Secondly, no payroll system can generate or retain copies of employee Income Statements as this is currently not catered for by the ATO. Employees can only access their Income Statements by one of the following ways:
- The employee's myGov account. If the employe lodges their own tax return and cannot create a myGov account, they will need to get in contact with the ATO on 13 28 61.
- If the employee is using a registered agent to lodge their tax return, their registered agent will have access to the employee's Income Statement.
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