It’s nearly the end of the financial year again. I know, time flies when you’re having fun!
This means that one of the things you must get done is your payroll at year end. Processing payroll has changed significantly with the introduction of Single Touch Payroll (STP). Most of you have already set up STP, if you have haven’t yet, make sure you do so by 1 July as per the ATO’s deadline. This blog post assumes you are already on STP reporting.
Complying with the rules and regulations of payroll is complex. You must make sure that you have all the required employees’ information on record, that you’re paying them the right amounts, following the awards and national employment standards, and that you’re recording leave entitlements properly.
It’s important to have the right processes in place and to use the latest software to manage your payroll. If you need any help with your payroll processes, then please get in contact with us – we’re happy to help.
But today we’re focusing on processing your year-end payroll, so what’s important for that? Well, to help you out, we’ve highlighted three important things you must do before you process your payroll at year end.
Complete all adjustments to salaries and wages before the end of the year
Once you’ve finalised the payroll at the end of the year, you shouldn’t have to change it. This is because with STP your information is filed automatically with the ATO and recorded against employees’ tax file numbers.
This means that any adjustments to owners’ salaries or close family members needs to be done before the end of the year. Historically, this may have been done a little after year end as part of a strategy to minimise your tax. We now must get ahead of this and do it before 30 June or we miss out.
This is the same for any team members as well. If you want to adjust their income with, say, a bonus that you want to include against your profit for 30 June, then you need to make sure you adjust the usual pay-run before processing your year-end payroll.
Complete all adjustments to superannuation before the end of the year
This holds true for superannuation as well. Make sure you have properly recorded the SGC component and salary sacrifice amounts. Any additional payments to superannuation must be included on the pay-run before processing the year end to be included in the tax year.
Extra superannuation payments are a great strategy for reducing tax while making use of your annual superannuation contribution limits, helping you build your nest egg for retirement.
But these amounts must be calculated, properly reported, and processed before completing your payroll at year end.
If you want to claim a deduction on super accruals for the 2020-21 financial year, make sure you process any outstanding payments and allow enough time for the contributions to reach the super funds before 30 June 21.
Reconcile your payroll summary reports to your general ledger and make sure you finalise your year end
After you’ve finished adjusting your payroll and completed any pay-runs for the financial year, it’s time to reconcile your payroll reports with the financial accounts.
This will make sure we haven’t missed anything or that there are no errors. The best way to do it is to prepare the payroll summary reports for the year and compare that with your general ledger reports for the same period.
I won’t go into it step by step here as I might send you guys to sleep. Your bookkeeper should know how to do this, or if you’d like some help doing this then please reach out – we’d be happy to help.
Another thing that is easily missed is that after the final pay-run, and once you’ve completed all your checks, you’ll need to complete a STP finalisation declaration by 14 July. You can do this in the software so that the STP will get marked as complete and the ATO notified. This will ensure your employees can access their information to complete their income tax return. Contact us for the tax return on the Gold Coast
We hope you find the above information useful.
If you need any help with reviewing your payroll or processing your year end, we’d be happy to help you. Simply call 07 5649 7650 to talk to one of the team.