End of Year Reconciliation - Single Touch Payroll

A crucial part of wrapping up EOFY is reconciling employee earnings reported via STP during the financial year with employee earnings processed in finalised pay runs for that same financial year. 

When creating a finalisation event, you can select to do this for all pay schedules (option only available for businesses with less than 2000 active employees at the time of running the event) or you can do this on a per pay schedule basis. This means that if you have more than one default pay schedule (ie, pay schedule assigned to an employee via their Pay Run Defaults screen) you will need to create and lodge a finalisation event for each one and therefore will also need to reconcile each event/pay schedule separately. 

You can download the STP excel report directly from the finalisation event. Click on the "Actions" button from within the event to see the following 2 reporting options:

1. Excel - this report will contain the information for only the employees that were included in the finalisation event. The totals in this report will match the totals that appear at the bottom of each column in the UI for the finalisation event. 
2. Excel (YTD) - this is the report you will need to reconcile what will be reported via STP for the financial year against the pays processed in finalised pay runs. The YTD report lists all  employees included in a successfully lodged STP event for the specified pay schedule(s) you have used to create the finalisation event. This includes any employees that had previously been marked as final during the financial year and so are not appearing in the finalisation event. You will know who those employees (that are not appearing in the finalisation event) are as they will be listed in the finalisation event wizard under the following warning banner:

Reconciling using the Excel (YTD) report

Upon opening the Excel (YTD) report, you will notice 4 worksheets:

• STP Year To Date: This contains all payroll earnings reported for all employees (attached to the selected pay schedule/s) via STP for the financial year;
• ETP: This contains all ETP earnings reported for all employees (attached to the selected pay schedule/s) via STP for the financial year;
• Payroll Year To Date: This contains all payroll earnings processed in finalised pay runs for all employees whose primary pay schedule is the pay schedule selected when creating the finalisation event. To be clear, if you have created a finalisation event for the pay schedule 'Monthly', any employee whose default pay schedule is 'Monthly' will appear in the worksheet. Additionally, all earnings processed in any finalised pay run for that employee will appear, even if the employee has been included in any adhoc pay run throughout the financial year. Who won't appear in this worksheet though is any employee marked as a closely held employee - this is because they would be excluded from STP events and so should not be included for reconciliation purposes;  
• Variance: This compares the total YTD taxable earnings between the 'STP Year To Date' and the 'Payroll Year To Date' worksheets, which is basically a comparison of what has been reported via STP and what has been processed in pay runs. If the variance amount is reported as $0, this confirms all figures match and you can comfortably proceed with lodging your finalisation event. If the variance amount is greater than a few dollars (we say a few dollars to allow for rounding), you will need to investigate further and identify/resolve the discrepancy before proceeding with the finalisation event lodgement. 
  • NB. Not Reported referenced in the line "minus Not Reported" in the STP YTD calculations column on this tab refers to column V (Not Reported) on the STP Year To Date tab.
    • The Not Reported figure/column is all earnings paid with the payment classification "Exclude from Payment Summary (Income Statement)". 
    • Some of these earnings may also be included on the ETP tab in this sheet, because ETP payments made with pay categories with this payment classification are "separately" reported (and that explains why these amounts are added back into the calculation, the point of the exercise is to reconcile STP reporting to total pay runs processed). 

NB. If the variance calculated in your excel YTD report is nil but you still plan to compare totals in this report with another report, eg. the pay categories or gross-to-net report, be aware that allowances marked with an asterisk (in the STP event) will have been reduced by pre tax deductions, because there is not enough in "non allowance" earnings to cover the deduction, eg...

1. the first clue that something may "need another look" about an employee in this scenario is the asterisk against the Allowances total
2. the second clue is that Gross payments are nil (meaning all "ordinary" earnings have been salary sacrificed)
3. the third clue is that total earnings across all STP categories in the event (ie. Gross payments + Allowances + Lump Sums) is NOT equal to the Total gross figure

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What are my next steps if there is a variance? 

What could cause a negative variance?

What could cause a positive variance?

Can I access the Excel (YTD) report in an amended finalisation event?

What are my next steps if there is a variance? 

If you are in the situation where your report shows a variance higher than a few dollars, the first thing to do will be to compare each employee's earnings stated between the STP YTD report and Payroll YTD reports. This will assist in pinpointing the specific affected employee(s) to then investigate further where the issue may lie. 

General rule of thumb is if the variance is a negative amount, this means what has been reported via STP (which includes the finalisation event) is less than what has been processed in pay runs. If the variance is a positive amount then the opposite applies, ie what has been reported via STP (which includes the finalisation event) is higher than the taxable earnings processed in pay runs.

What could cause a negative variance?

The main reason for a negative variance could be that one or more employees were included in a failed or partially successful pay event and so their YTD earnings were not reported. Subsequently, one or more of these employees may not have been included in another event (stopped working and so there were no other earnings to report and/or previously marked as 'is final') which meant they were either (a) never reported successfully via STP or (b) their current YTD earnings were not reported. This would result in an STP YTD amount that is less than their Payroll YTD amount.

If this is the case, you should create and lodge an update event for the affected pay schedule(s) before lodging the finalisation event. Then, once confirmed that the update event has been lodged successfully refer back to the created finalisation event and refresh the data (do this via the "Actions" button > "Refresh Data" option). Download an updated version of the Excel (YTD) report and check that there is no longer a variance before proceeding with the finalisation event lodgement.

What could cause a positive variance?

Possible reasons could be:

• Closely held employees: if an employee was included in any successful STP events throughout the financial year and was then subsequently marked as closely held meaning that they were no longer being reported via STP. If this is the case, you must unmark the employee as closely held so that they are included in the finalisation event instead. You must not generate/lodge payment summaries for these employees as it will overstate their YTD earnings for the financial year. To unmark the employee as closely held, untick the "Closely held employee" checkbox (located in the employee's Pay Run Defaults screen). Then, refer back to the created finalisation event and refresh the data (do this via the "Actions" button > "Refresh Data" option). Download an updated version of the Excel (YTD) report and check that there is no longer a variance before proceeding with the finalisation event lodgement.  
• Incorrect pay category payment classification: There may be instances where PAYG exempt pay categories are created to reimburse expenses or for any other reasons and are paid to an employee when processing their normal pay. If this payment does not form part of an  employee's wages/salary, you will need to review the payment classification of that pay category if it is currently set to 'Default'. Any earnings associated to pay categories classified as 'Default' will be reported via STP. Reimbursements typically are not payroll related and should be classified as 'Exclude from Payment Summary (Income statement)' although such assessment should be undertaken by the business. For allowance based pay categories, you should also refer to this article to ensure they are configured correctly. If a pay category's payment classification has been setup incorrectly, you must first make the required correction to the classification. Then, what you do next depends on whether the affected employees are included in the finalisation event or not:
  • If all affected employees are listed in the finalisation event, then you just need to refresh the data (do this via the "Actions" button in the finalisation event > "Refresh Data" option). Then download an updated version of the Excel (YTD) report and check that there is no longer a variance before proceeding with the finalisation event lodgement.
  • If not all affected employees are listed in the finalisation event, (they may not be included as they were previously finalised in a prior event) then you should create and lodge an update event for the affected pay schedule(s) before lodging the finalisation event. If the affected employees do not appear in the update event, you can manually add them in (do this via the "Actions" button in the update event > "Add employee" option). Then, once confirmed that the update event has been lodged successfully refer back to the created finalisation event and refresh the data (do this via the "Actions" button > "Refresh Data" option). Download an updated version of the Excel (YTD) report and check that there is no longer a variance before proceeding with the finalisation event lodgement. 

Can I access the Excel (YTD) report in an amended finalisation event?

Yes you can. The exact same process and format of the report as described above is available in all amended finalisation events. 

For more information about end of year processing, refer to our STP EOFY Guide.

If you have any questions or feedback, please let us know via support@yourpayroll.com.au.