Happy New Financial Year everyone! Now we turn our minds to finalising the payroll for the 2020 financial year and for most small businesses, this will be due at the end of July or if you have more than 19 employees – on July 14th.
Here are the steps that I recommend taking in order to finalise the payroll year and complete the STP finalisation:
- Check your bank feeds. Best practice is that the bank account that you pay payroll from is reconciled.
- If you use an electronic clearing account for payroll – make sure that the balance of this account is NIL.
- Check that your employee details are up to date……I’m talking names, dates of birth and tax file numbers.
- Make sure that all of your payroll items have been allocated to the respective ATO reporting categories correctly. For MYOB users, click here for AccountRight and here for Essentials.
- If you have paid any termination payments for employees during the year, now is the time to go back and review these for correctness.
- Obtain any Reportable Fringe Benefit Amounts from your accountant if you lodged a Fringe Benefits Tax Return in March – June this year.
- Confirm that the last pay run lodged via STP was accepted. Make sure the payroll year is set to 2019/20 as it will default to the current pay year.
- “Print” the payroll summary report for the period 1st July – 30th June and compare this to the YTD verification report. Specifically check that the total income (wages) and total PAYGW Withholding matches on both reports. If yes, proceed to the next step. If no, see below:
- Select all employees and then press the “Set as Final” button.
- You are done!!
What to do if the reports don’t match
I recommend running a NIL pay run for all employees to see if this updates the balances. If this doesn’t work, you will need to go through each employee and determine which employee is out of balance and then check each payroll category has been allocated to the STP per Step #4.
Ensure that when you complete the June BAS, the total PAYGW on the verification statement and the payroll summary report matches the PAYGW you have declared on the BAS for the entire year.
If you use MYOB Accountright, consider updating to 2020.2.2 as you will not have to complete the STP Finalisation before running the first payroll in the 2021 financial year – this is a gamechanger and totally takes the pressure off. Hooray!
Don’t feel pressured by your staff. Getting the year end process right is better than rushing and getting it done incorrectly. If there is an error, it will likely result in your staff having to amend their income tax returns.