Another financial year gone, another EOFY webinar!
For the majority of businesses, this will be the last year generating payment summaries for employees and a payment summary annual report (PSAR) to the ATO. Additionally, the new financial year will entail reporting through STP which may scare users initially. But don't fret, the process is quite simple and something you will fast get used to. Saying that, we know there are lots of questions and have compiled this FAQ following on from our webinar. 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 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.
Please note that if you change this setting now and then generate payment summaries, rest assured that this will not affect anything on an employee's payment summary or the PSAR.
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. This excludes pay slips that are set to the legacy pay slip setting - rather these will continue to show HELP and SFSS but consolidate the amount into HELP. We strongly suggest updating your pay slip settings to the current version as we will no longer be supporting any maintenance of the legacy version. More details regarding this will be communicated shortly to affected users.
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 generating payment summaries
Ensure Allowances are set up correctly
The ATO have rules on how certain allowances should be reported in payment summaries. Click here to access the ATO's advice. Allowances are configured via the Payroll Settings > Pay Categories screen.
Where an allowance is to be included in the gross payment of the payment summary ensure you have assigned the option "Default" as the pay category's Payment Summary Classification.
Where an allowance is to be shown separately in the allowance box of the payment summary ensure you have assigned the option "Allowance (Other)" as the pay category's Payment Summary Classification.
Where an allowance is NOT to be shown on the payment summary ensure you have assigned the option "Exclude from Payment Summary" as the pay category's Payment Summary Classification.
Salary Sacrifice Super Deductions (RESC)
It is absolutely essential that Reportable Employer Super Contributions (RESC), also known as Salary Sacrifice Super, is setup correctly. The ramifications of this is that employee YTD amounts will be displayed incorrectly on their payment summary 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:
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.
Union Fees & Workplace Giving
If you have processed any of these deduction types for employees, ensure they are classified correctly as these must be identified on the payment summary, as per the below example:
To ensure these 2 deduction types are classified correctly, each deduction category must be assigned the appropriate "Payment Classification" via the Payroll Settings > Deduction Categories screen.
The correct "Payment Classification" for Union Fees is Union or Professional Association Fees. The correct "Payment Classification" for Donations/Workplace Giving is Workplace Giving.
Finalise pay runs
Put simply, if a pay run is not finalised it will not be included in the YTD payroll figures displayed in payment summaries and the PSAR. If you generate payment summaries and lodge the PSAR before finalising all pay runs for the 18/19 FY you will then need to issue employees with amended payment summaries and re-lodge the PSAR 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 to the ATO.
It will be quite obvious to you if there are unfinalised pay runs for the 18/19 FY. From the Report > Payment Summaries screen, once you click on "Show Payment Summaries", if you see the warning message below, this indicates unfinalised pay runs exist.
Section 3: Payment Summaries vs Finalisation Event
There is still some uncertainty surrounding when payment summaries should be generated if some 'dabbling' in lodging STP events has occurred during the financial year. If you have never reported through STP this financial year, then you can skip this whole section and proceed to section 4. Otherwise please review to ensure you are undertaking the correct EOFY process.
The general rule here is if you have lodged STP events you MUST lodge a finalisation event and MUST NOT lodge payment summaries. 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 started reporting STP in the middle of the financial year. Does that mean we need to generate payment summaries for the time prior to that?
Once you start reporting successfully through STP, you can't stop! You will need to complete a finalisation event as your EOFY process. Additionally, you must 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 only started reporting STP mid year and had previously processed termination pays. What end of year process do we use for the terminated employees?
If you have started reporting through STP, we strongly suggest you follow the STP EOFY process for all employees. In fact, the terminated employees have probably already appeared in the first STP events lodged to the ATO. Double check these events and so long as these employees have been marked as 'is final', the EOFY process has already been completed for these employees.
With these terminated employees as they have been encompassed in STP events, you must not generate payment summaries/PSAR for them as the payroll data will be overstated to the ATO.
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 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.
Section 4: Publishing Payment Summaries
Some of our employees do not have an email address. How do we issue payment summaries to them?
In this instance, you will need to issue the payment summary to them in person or alternatively post it to them (so ensuring the employee's postal address is correct is extremely important).
From the Reports > Payment Summaries screen, once you have published the payment summaries, you can then print the payment summaries, via bulk or on an individual basis. To do this (in bulk) click on "PDF". This will download all the payment summaries in PDF so you can then print them. Alternatively, if you only want to print a payment summary for a specific employee, click on Actions > Download (located to the far right of the employee's payment summary line).
The system will not allow me to publish an employee's payment summary. Why, and how do I fix this?
The only scenario where you will be unable to publish a payment summary is when validation warnings have not been fixed. We have enforced this practice of not being able to publish payment summaries for these employees in order to avoid failed lodgements with the ATO. You will know there is a validation error for an employee in 2 instances (only after you have click on "Show Payment Summaries"):
- A "!" icon will be displayed in the "Status" column for that employee; and
- A "Warnings" tab will appear on the Payment Summaries screen.
Clicking on the "Warnings" tab will show you the exact issue for the employee:
Once the issue is rectified you can click on "Show Payment Summaries" again to refresh the data and then publish the payment summary.
Section 5: Enabling Single Touch Payroll (STP)
We have introduced a wizard to help guide you through the process of enabling STP for your business. Instructions on how this works can be found here.
Ensure your connection to the ATO is set up correctly
Part of the process of enabling STP involves connecting your payroll software with the ATO. Simply completing the wizard does not activate that connection. Rather, you must complete steps outside of the wizard to ensure the connection is setup correctly. Detailed instructions and options on how to connect can be found here.
Ensure Allowances are set up correctly for STP
The introduction of STP has brought about a reclassification of allowances. As such, once you have completed generating the payment summaries and lodged the PSAR and before you commence reporting through STP 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.
Should we register STP now or after payment summaries are lodged?
There is no specific 'deadline' per se of when a business must enable STP in their business. The only thing you need to be aware of is the deadline of reporting through STP once a pay run in the new financial year has been finalised. The ATO stipulates the following:
"You are required to report a pay event to the ATO on or before the pay day. The pay day is either the payment date stipulated in the electronic transaction to your financial institution or, if you did not stipulate a date for payment, the date you intend to make the payment into your employee's bank account."
As such, you must have enabled STP in a timely manner to ensure you are able to successfully lodge a pay event on or before the pay date of the first pay run in the 19/20 financial year.
If you have any feedback or questions please contact us via firstname.lastname@example.org.