Note: This only applies to businesses that are exempt from reporting STP, and have therefore chosen not to during the financial year. For the 2021/22 financial year, exemptions only apply to:
- WPN holders (until 1st July 2023); or
- Businesses that have been granted a deferral or special exemption from the ATO. If this scenario applies to you, you will need to send an email to the support email address provided at the end of this article and attach written proof from the ATO so that we can switch on the payment summary functionality for your business.
Businesses who do not meet the above exemptions or exempt businesses (as stated above) that have gone ahead and lodged a successful (or partially successful) STP event during the financial year will not be given the option of publishing payment summaries. Rather, businesses will need to complete their end of year process by lodging an STP finalisation event.
This article will guide you through the process of wrapping up the 2021/2022 financial year, generating and lodging your employees' payment summaries and getting ready for the 2022/2023 financial year. We recommend you also refer to the Payment Summary Processing FAQ in case you have any questions along the way.
This article is broken down into the different phases of year end processing, as follows:
- Housekeeping: This covers off the recommended checks and reconciliations that should be completed to ensure all business and employee details are correct prior to publishing payment summaries.
- Lodging payment summaries: This includes publishing and lodging payment summaries, sending notifications to employees and what to do if you need to amend any payment summaries.
- Preparing for FY 2022/2023: A few notes on changes/updates being introduced in the new year and pointers on setting up for STP.
These steps should be taken prior to publishing payment summaries:
- Review employee details
- Review ATO settings
- Review FBT settings
- Review pay categories
- Review deduction categories
- Check opening balances
- Audit salary sacrifice super/RESC
- Finalise pay runs
Review employee details
Ensure employee details are up to date. In particular the employee's tax file number, 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 trigger a validation and prevent payment summaries from being published.
A quick way to audit this information is to generate an 'Employee Details Report' and select the following display columns to retrieve the information:
- Postal address
- Tax file number
Ensure you also include employees terminated in this financial year when generating the report as they will also need to be issued with payment summaries.
If you need to update any of the employee details, you can do this individually by navigating to the relevant screen of that employee's record and making the change. Otherwise, you can update in bulk by exporting the employee file, making changes in the spreadsheet and then importing the updated file.
Review ATO settings
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 does not support 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.
Review Fringe Benefits Tax (FBT) settings
Is your business exempt from FBT under section 57A of the FBTAA 1986? If so, you should ensure this has been configured as such via the 'ATO Settings' page. By default, this option will be set to 'No' but it is important to review how this has been set up to ensure the employee payment summaries correctly reflect this information.
For businesses with multiple employing entities set up, please note that the FBT setting must be configured for each employing entity. This can be done via Payroll Settings > Employing Entities > then, click on the relevant employing entity.
Review pay categories
Review your pay categories to ensure the correct classification is applied. This is configured via the 'Payment Classification' field within the pay category settings (see image below):
It is important that your payroll data is reported correctly to the ATO, so please ensure that all pay categories have been classified correctly as per ATO specifications. Pay particular attention to any pay categories classified as (a) Default, (b) do not report on Payment summaries and (c) allowance classifications.
Specifically with allowances, we refer you to this article as a guideline on how your allowances should be classified. By utilising this article, you can also start prepping for STP reporting at the same time as ensuring the allowance based pay categories are classified correctly. This allowance classification configurations works for both payment summaries and STP.
In the article:
- where the 'Include in gross payment?' column states 'Yes', ensure the 'Payment Classification' is set to 'Default';
- where the 'Include in gross payment?' column states 'No' and the 'Include in allowance tuple?' states 'No', ensure the 'Payment Classification' is set to 'Exclude from Payment Summary (Income Statement)';
- where the 'Include in gross payment?' column states 'No' and the 'Include in allowance tuple?' states 'Yes', refer to the 'STP Field' to see the value stated. This will then determine what 'Payment Classification' is assigned to the allowance based pay category. For eg, if you refer to the second allowance described in Table 5 in the article, the STP Field = Meals, so the payment classification would be 'Allowance - overtime meal':
Review deduction categories
For any 'Union or Professional Association Fees' or 'Workplace Giving' deductions, be sure to assign the correct classification to the deduction category 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:
Salary sacrifice super (RESC) deductions are discussed further below.
Check 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 processing pay runs 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.
Please note: Do not change the initial financial year to the 2021/22 FY if you have already been processing pay runs in this payroll system for multiple financial years. This setting only relates to users that have migrated to this payroll platform part way in the 2021/22 FY and want to capture all opening balances into the employee payment summaries.
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. If you're using the system 'Salary Sacrifice Super' deduction category, the checkbox will be ticked by default:
Audit salary sacrifice super / RESC
Any RESC classified 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 pre-populates with an amount that comes from:
- Pay runs: any pre-tax deduction set up to be 'paid to a super fund', processed in any finalised pay run(s) for the financial year; and
- Opening balance: any pre-tax deduction whose checkbox 'Include on payment summary as RESC' is ticked, and where the business' initial financial year is set to 2021/2022.
We strongly suggest you audit all RESC amounts processed in 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 potentially being stuck with a tax liability. 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'.
If the Opening Balance figures are incorrect, they can be updated by following these instructions: Setting Employee Opening Balances (Initial Values)
On 4 November 2020 we made changes to the RESC deduction category in order to help users avoid incorrectly allocating RESC deductions to anything other than a super fund. This article provides detailed information about these changes.
Finalise pay runs
Ensure that all pay runs with a date paid on or before 30 June are finalised, including any adjustment pay runs you had to create. If you publish the payment summaries and then have to process adjustment pays, you will be required to publish amended payment summaries, so we strongly suggest you hold off on commencing the lodgement process until you are 100% confident all pays for the financial year have been processed.
Please Note: The date the pay run is PAID determines which financial year that pay run applies to. The finalisation event for the 2021/22 financial year will only include earnings etc from pay runs paid within that financial year. For example:
- Pay run period ending 29/6/2022, PAID 30/6/2022 will be included in the 2021/22 financial year.
- Pay run period ending 29/6/2022, PAID 1/7/2022 will not be included in the 2021/22 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 a period ending 2/7/2022, paid 3/7/2022. Create pay run as normal and set the pay period ending 30/6, ensuring you stipulate the 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 the 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 3/7/2022.
2. Generate, publish and submit payment summaries
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.
Once the above is completed, you will now be ready to publish the employees' payment summaries. Please refer to this article for instructions on how to complete this step. This also includes instructions on how to manually enter reportable fringe benefits amounts in the affected employee's payment summaries.
Please remember that payment summaries must be issued to employees by no later than 14 July.
Once your payment summaries are published, you must lodge your payment summary annual report to the ATO by no later than 14 August. You can lodge the report either by:
3. Preparation for FY 2022/2023
There are several considerations for the new financial year:
Single Touch Payroll
Although STP exemptions still exist for WPN holders until 1st July 2023, you can choose to commence reporting earlier. Please note that WPN holders can only use the services of a registered agent to report STP on their behalf, 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.
Tax table updates (information only)
The tax tables for the new financial year are automatically loaded. Please note that any pay runs with a date paid of 1/7/2022 or later will apply the FY 2022/2023 tax tables automatically.
The Superannuation Guarantee Contribution (SG) percentage will increase to 10.5%, effective for all pay runs with a date paid on or after 1 July 2022. The system will automatically apply the increase across all businesses, except in the following circumstances:
- A business that does not have the "Automatically update super rates" checkbox ticked (located on the Payroll Settings > Details screen); or
- The "Override" checkbox in the 'Super Rate' column in an employee's Pay Rates screen is ticked; or
- The "Override" checkbox in the 'Super Rate' column of any pay rate template is ticked.
If any of the above scenarios apply to a business and/or employee record and you want the 10.5% SG rate to automatically calculate on OTE, you must change your settings accordingly so that the "Automatically update super rates" checkbox IS ticked and/or the "Override" checkbox in any employee's Pay Rates screen or pay rate template is NOT ticked. For more information, review: Annual increase to superannuation guarantee (SG) rate effective from 1 July.
The maximum quarterly contribution base will increase to $60,220. This increase will automatically apply to all employees who are currently on the default contributions base, from 1/7/2022. Employees that aren't on the default setting will not be updated so you will need to do this manually.
If you want super contributions to be included in the 2021/2022 financial year (for tax reasons), the contributions need to reach the super funds by 30 June 2022.
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 23rd June 2022.
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 2022. 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.
NB If you are using another clearing house to process super payments, ensure you liaise directly with the clearing house to confirm their deadlines.
Minimum Wage Increase & Award Updates
Following the Annual Wage Review 2022 on the 15th June 2022, the Fair Work Commission handed down its Annual Wage Review decision. This has resulted in an increase to the national minimum wage of 5.2% from 1 July 2022.
The national minimum wage will be $812.60 per week or $21.38 per hour, effective from the first pay period commencing on or after 1 July 2022.
In addition, Modern Awards minimum rates will be increased by 4.6% subject to a minimum increase of $40 per week. As a result:
Award rates above $869.60 per week will increase by 4.6%
Award rates below $869.60 per week will increase by $40 per week.
The following Modern Awards will have a delayed effective date of 1 October 2022:
- Aircraft Cabin Crew Award 2020
- Airline Operations - Ground Staff Award 2020
- Air Pilots Award 2020
- Airport Employees Award 2020
- Airservices Australia Enterprise Award 2016
- Alpine Resorts Award 2020
- Hospitality Industry (General) Award 2020
- Marine Tourism and Charter Vessels Award 2020
- Registered and Licenced Clubs Award 2020
- Restaurant Industry Award 2020
For customers using our pre-built modern awards, updated versions of these award packages will be published by 1 July 2022 and available to install directly from the business dashboard. Award updates must only be applied once the final pay run subject to the pre-2022 award wage increase is finalised.
ATO vehicle allowance rates update
The ATO-approved vehicle allowance rates for 2022-2023 will increase to 78c per kilometre. Please refer to the legislative instrument for further information.
If your business has set its own vehicle allowance rates, you will need to ensure you are not paying no less than the ATO approved rate.
If you have any questions or feedback please let us know via email@example.com.