This end of year guide applies only to businesses that are exempt from reporting STP, and have therefore chosen not to, during the 2019/2020 financial year. Exemptions only apply to:
- WPN holders; or
- Closely held employees of businesses with 19 or less employees (but only for the closely held employees).
Businesses who do not meet the above exemptions are obligated to report their payroll data via STP as per ATO requirements and should therefore refer to the End of Financial Year Guide for STP.
This article will guide you through the process of wrapping up the 2019/2020 financial year, generating and lodging your employees' payment summaries and getting ready for the 2020/2021 financial year.
The article should be read in conjunction with the Payment Summary Processing FAQ support article.
1. Preparation
These steps should be taken prior to publishing payment summaries:
1.1. Review Configuration Data
- Ensure employee details are up to date. In particular the employee's email and postal address. Payment summary notifications will be sent to the email address provided in the 'Email' field so it is important the information is correct. However, the payment summary can be printed and dispersed manually if required. Additionally, check that the employee's address is complete and correct as this will prevent payment summaries from being able to be published. A quick way to audit this information is to generate an 'Employee Details Report' and select the relevant display columns to retrieve the information. Ensure you also include employees terminated in this financial year as they may also have payment summaries that need to be generated.
- Ensure the employee's Tax File Number (TFN) and additional information (from the employee's 'Tax File Declaration' screen) are correct. A quick way to audit this information is to generate an 'Employee Details Report' and select the 'Tax Dec' display column to retrieve the information. Again, ensure you also include employees terminated in this financial year as they may also have payment summaries that need to be generated.
- Ensure your ATO settings are up to date. You can do this by going to 'Payroll Settings' > 'ATO Settings' page > 'ATO Settings' tab. If you're planning on lodging your payment summaries to the ATO electronically, please ensure you've registered your software ID by following the steps here. N.B. For WPN holders, the ATO no longer supports lodging payment summary data electronically. As such you will need to either download the EMPDUPE file and upload via your Business Portal or report to the ATO using paper forms.
- Make sure you have applied the correct fringe benefits tax (FBT) setting with regard to whether the employer is exempt from FBT under section 57A of the FBTAA 1986. This field can be found on the 'ATO Settings' page. By default, this option will be set to 'NO' but it is important to review this to ensure it is correct. If you do select 'YES' you will then also need to select the organisation type the employer falls under:
If the employer is exempt from FBT under section 57A of the FBTAA 1986 the following option will also be available:
You may have arrangements in place with your employees where an agreement has been made to salary package meal entertainment and entertainment facility leasing expenses. If this is the case, select the 'Yes' checkbox so that a separate single grossed-up cap of $5,000 will apply to the employee’s fringe benefits exemption amount. N.B. This additional setting does not affect payment summary data - it is merely in preparation for when you commence STP reporting.
If you have multiple employing entities set up in your business, ensure you configure the FBT setting for each employing entity. You can do this from ‘Payroll Settings’ > ‘Business Settings’ > ‘Employing Entities’. - Review your pay categories to ensure they are classified correctly. Ensure that the 'Payment Classification' field is correct (see image below):
Specifically with allowances, we recommend using the ATO article on Withholding from allowances as a guideline of how your allowances should be classified. In the tables there, where the 'Include on payment summary?' column states:
- 'Yes (include total allowance in gross payment)', ensure the 'Payment Classification' is set to 'Default';
- 'Yes (show total allowance separately in the allowance box with an explanation)', ensure the 'Payment Classification' is set to 'Allowance (Other)'. The reference to 'explanation' is covered by the payroll software as it will detail the name of the allowance pay category on the payment summary;
- 'No', ensure the 'Payment Classification' is set to 'Exclude from Payment Summary (Income Statement)'.
When it comes to lump sum amounts, refer to the ATO website for guidance on which lump sum category, eg. A, B, D or E, to categorise the pay category. N.B. All system created lump sump pay categories have been categorised correctly and so these don't need to be reviewed.
When it comes to STP reporting, categorising allowances are done differently. As such, once you have completed your end of year process and have decided to commence STP reporting in the new financial year, we strongly recommend you review this article to ensure correct setup of allowance pay categories before commencing STP reporting. - Review your deduction categories. For any 'Union or Professional Association Fees' or 'Workplace Giving' deductions, be sure to adjust the 'Payment Classification' field accordingly so the deduction amounts are itemised separately in the payment summary.
Here is an example of what union fee and workplace giving deductions look like itemised on the payment summary:
1.2. Initial Values / Opening Balances
If you have migrated to this payroll system from another system during the financial year, it is important that the opening balances are set up correctly. If you want to produce only one payment summary for employees for the whole financial year, you should import the payroll earnings from the previous payroll system using our initial values/opening balances feature. Alternatively, if you will be generating multiple payment summaries, please ensure you have not imported previous earnings, PAYG, RESC, etc as it will overstate employee earnings to the ATO. Importing leave balances is not an issue in this scenario as this is not reported in payment summaries.
If you created your business in the previous financial year but didn't start using it until this financial year, it may be necessary to review the 'Initial Financial Year' setting under 'Payroll Settings' > 'Opening Balances' to ensure the correct financial year is configured:
If there are any opening balances for deductions that should be reported as Reportable Employer Super Contributions (RESC) on the payment summary, be sure to tick the 'Include on payment summary as RESC' checkbox alongside the deduction category in the employee's 'Opening Balances' screen:
1.3. Reportable Employee Super Contributions (RESC)
Any RESC amounts processed in pay runs and through opening balances are automatically included and itemised on payment summaries in the 'Reportable employer superannuation contributions' field:
This field will pre-populate from any pre-tax deductions that are set up to be 'paid to a super fund'. Any RESC for this financial year prior to migrating to this payroll system can be set up in the 'Initial Values/Opening Balances' section – refer to 1.2 above.
We strongly suggest you also review all RESC amounts made in the pay runs to ensure you have correctly assigned them to be paid to a super fund. The ramifications of any other allocation (ie other than to the super fund) will result in employee amounts not being reported correctly on the payment summary and the employee may be requested to pay money to the ATO. To audit RESC amounts, follow these steps:
- Generate a 'Deductions Report' using the date range 'Financial Year' and filter the report by selecting the relevant RESC deduction category;
- Generate a 'Super Contributions Report' using the date range 'Financial Year' and filter the 'Contribution Type' to 'Salary Sacrifice';
- Compare the total $ amounts between both reports. Do they match? If yes, then all is well. If the amounts don't match, review each employee to identify where the difference lies.
- Once the differences are identified, you will need to fix them. The method used to fix this depends on whether the amount comes from the employee's opening balance or from within a pay run.
- Once any corrections required are made, 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
You will know that the issues stems from the employee's opening balance because the 'Deductions Report' will make reference to 'Opening Balance (2/07/2019)': 
If this is the case, refer to 1.2 above on how to fix this.
Fixing RESC amounts incorrectly entered via a Pay Run
You will know that the issues stems from the pay run because the 'Deductions Report' will make reference to the actual pay run:
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 (with a date paid of no later than 30 June) and manually add all affected employees in that pay run;
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To reverse the incorrect entry, add a deduction line for salary sacrifice super and set it to 'Manual Payment'. Enter the total salary sacrifice amount that needs to be corrected but enter it as a negative amount.
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To add the correct entry, add a deduction line for salary sacrifice super and set it to be paid to the super fund. Enter the total salary sacrifice amount that needs to be corrected as a positive amount. An example of how this will look is as follows:
- Repeat the above steps for each completed employee and then finalise the pay run.
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. As such, you should double check any pay run inclusions set up for salary sacrifice deductions. To do this, generate a 'Pay Run Inclusions' report to review any ongoing RESC. 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.
1.4. Finalise Pay Runs
Ensure that all pay runs are finalised, including any adjustment pay runs you had to create.
Please Note: The date the pay run is PAID determines which financial year that pay run applies to. Payment summaries generated for the 2019/2020 financial year will only include earnings etc from pay runs paid within that financial year. For example:
- Pay run period ending 29/6/2020, PAID 30/6/2020 will be included in the 2019/2020 financial year.
- Pay run period ending 29/6/2020, PAID 1/7/2020 will be included in the 2020/2021 financial year.
If you want to include every day worked within the financial year, you might have to split a pay run.
For example, a weekly pay run for period ending 2/7/2020, paid 3/7/2020. Create pay run as normal and set the pay period ending 30/6, ensuring you stipulate date paid to be 30th June. You will then need to adjust the employee hours to reflect the hours worked for the 26th - 30th June and then finalise pay run. Then create another pay run for the period ending 2/7 and adjust the employee hours to reflect the hours worked for the 1st and 2nd. Then finalise the pay run using the normal date paid, being 3/7/2020.
1.5. Reportable Fringe Benefit Amounts (RFBA)
RFBAs can be entered manually once the payment summaries are generated. Instructions on how to enter RFBAs can be accessed here.
2. Payment Summary Generation
Ready to proceed?
Once you have completed the steps above, you will be ready to publish the employees' payment summaries. Please refer to this article for instructions on how to complete this step.
Prior to publishing the payment summaries, you should reconcile your financial year data. Refer to the End of Year Reconciliation article for instructions on how to do this. Please remember that payment summaries must be issued to employees by no later than 14 July.
Once your payment summaries are published, you must submit your payment summaries to the ATO by no later than 14 August. You can lodge payment summaries either by:
- Generating and uploading an EMPDUPE file via your ATO Business Portal; or
- Lodging electronically (as stated above this method cannot be used by WPN holders).
Once you send the payment summary notifications to the employees they will receive an email notification letting them know that their payment summary is available for download, along with a link for downloading. Employees will be able to access their payment summary at any time using either the employee self-service portal and through WorkZone.
3. 2020/2021 Financial Year
There are several considerations for the new financial year:
3.1 Single Touch Payroll
Although STP exemptions still exist for closely held employees and WPN holders for the 2020/2021 financial year, you can still choose to start reporting earlier. If you wish to do so, you can start the setup process by using our STP Registration Wizard.
N.B. WPN holders must use the services of a registered agent to report STP as the ATO does not support electronic lodgement by WPN holders. Refer to section 2, "A Registered TAX/BAS Agent", of this article for further information on how to start reporting STP using a registered tax/BAS agent.
You can also browse our vast knowledge base of articles relevant to STP.
There is also plenty of information on STP that can be found on the ATO website.
3.2 Tax Table Updates (information only)
The tax tables for the new financial year are automatically loaded (and have been done so already). Please note that any pay runs with a date paid of 1/7/2020 or later will use the FY2020/2021 tax tables automatically.
3.3 Superannuation Updates (information only)
The Superannuation Guarantee Contribution (SG) percentage does not change for this financial year. It remains at 9.5%.
The Maximum Quarterly Contribution Base will increase from $55,270 to $57,090. This setting will be automatically applied to all employees who are currently on the default contributions base on 1/7/2020. Employees that aren't on the default setting will not be updated so you will need to do this manually.
The concessional contributions cap remains at $25,000 for all age groups. Any employee who has recurring salary sacrifice deductions paid to a super fund should be reviewed in light of this.
3.4 Processing Super (information only)
If you want super contributions to be included in the 2019/2020 financial year (for tax reasons), the contributions need to reach the super funds by June 30th 2020.
To meet this deadline and if you're using our automated super payments functionality (ie Beam), your super batch will need to be successfully uploaded/paid by 3.30pm AEST on Tuesday 23rd June 2020.
If you have pay runs scheduled for payment between 23 and 30 June you can always create these pay runs in advance (on or before the 23 June) using the usual period end and paid dates, finalise the pay run and then create your super batch for the period up to 30 June 2020. This will allow you to include the super amounts before the deadline without the need of paying employees in advance, ie you won't need to upload the ABA file to the bank until the actual scheduled paid date of the pay run.
N.B. If you are using another clearing house to process super payments, ensure you liaise directly with the clearing house to confirm their deadlines.
3.5 Award Updates
Normally at this time of the year, the Fair Work Commission would have announced their annual wage review decision regarding the national minimum wage. For customers using the pre-built modern awards, updated versions of these award packages would normally be published on 1/7/2020 with the applicable rate changes included.
However, this year, as a consequence of the COVID-19 pandemic, the timelines for consultations, submissions, etc have been extended to enable parties to respond to delayed release ABS March quarter national accounts. The Commission is yet to make a decision on when the wage review decision will be handed down and the operative date for any updates to awards.
What does this mean?
At present, there is no definitive timeframe as to when an announcement will be made. It's seemingly unlikely that award wage updates will occur from 1 July, however you can never say never.
We will obviously be staying abreast of this exciting development and keep you informed of any updates along the way.
3.6 ATO Vehicle Allowance Rates Update
The ATO-approved vehicle allowance rates for 2020-2021 have been updated. Please refer to the ATO website for further information.
If your business has set its own vehicle allowance rates, you will need to update them. If you are using pre-packaged awards, we will update the rates accordingly.
If you have any questions or feedback please let us know via support@yourpayroll.com.au.