Preparing for EOFY 2023/2024 - Australia

As we quickly approach our 2024 EOFY, it is imperative that your business starts preparing in advance for your final pay runs and lodgements!

To assist you with this, we have put the below list of items which with help prepare you for this busy time of year:

• Review employee details
• Review FBT settings
• Review pay categories
• Review deduction categories
• Audit salary sacrifice super/RESC
• Finalise & Reconcile pay runs
• Lodging your finalisation event
• Click Here for a guide which outlines how to successfully complete/troubleshoot your STP Reconciliation 

1. Review employee details

Ensure employee details are up to date. In particular the employee's tax file number, email and postal address. . The presence of an email address will allow you, should you choose to, to send automated email confirmation to employees notifying them when your end of year finalisation has been completed and lodged with the ATO.

Additionally, to save time and avoid validation errors in your EOFY STP Finalisation Event, we strongly recommend running an Employee Details Report and making corrections or updates where required. Validation errors will need to addressed before the ATO will accept your lodgement.

Go to Reporting > Employee > 'Employee Details Report'.  select the following display columns to retrieve the information:

• Postal address
• Email
• Tax file number

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. 

2. Review 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 any reportable fringe benefits amounts are reported correctly in the finalisation event and thereby the employee's Income Statement. 

For businesses with multiple employing entities, please note that the FBT setting must be separately configured for each employing entity. This can be done via Payroll Settings > Employing Entities > then, click on the relevant employing entity.

Prior to 16 July 2021 there were an additional 2 sub-settings which separated out the type of organisation and whether or not employees were entitled to a separate cap for salary packaged entertainment benefits. These have both been removed as they do not impact whatsoever how RFB amounts are reported for employees via STP (or payment summaries for that matter) and so were redundant. As a result, the following will also occur:

• Any existing lodged STP events that did not have RFB amounts reported will only have one RFB column (called “RFBA”) displayed in the event;
• If any existing lodged STP events have RFB amounts reported in the ‘RFBA – Entertainment’ or ‘RFBA – Other’ column, the applicable RFB column will remain in the event as will the amounts previously reported, that is, previously entered RFB amounts will not be lost as a result of this change;
•  As per new STP events created moving forward there will only be one column for RFBA.
  
  

3. 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):

As part of STP Phase 2, the ATO has new regulations around the disaggregation of gross income, so it’s important to ensure that your pay categories are classified appropriately as per ATO requirements. 

PAYG Exempt pay categories:

A pay category that is set to be PAYG exempt is normally categorised as something other than 'Default' in the Payment Classification field in the pay category settings, eg. Allowance, Lump Sum etc. etc.  This is because PAYG Exempt earnings are deemed tax free for a particular reason.  

Note, if you select Default in the Payment Classification field for PAYG Exempt earnings then your STP finalisation reconciliation will show a variance equal to the amount paid using this pay category, because those earnings will not be included in the Taxable Earnings total (in the payroll YTD section) but they will be included in the Payroll Gross Earnings total (in the STP YTD section).  Information about how to fix this is in our STP EOFY Reconciliation article - go to "Incorrect pay category payment classification" in the 'What could cause a positive variance section'.

4. Review deduction categories

Review deduction categories

For any 'Union or Professional Association Fees' or 'Workplace Giving' deductions, be sure to audit the 'Classification' field accordingly so the deduction amounts are itemised separately in the Income Statement:

As part of STP Phase 2, a number of new classifications have been introduced to categorise the deduction types, so it is important to ensure your deduction categories have been classified correctly.

There have also been two Salary Sacrifice classifications introduced as part of STP Phase 2:

• Salary sacrifice (superannuation): This refers to an effective salary sacrifice arrangement, entered into before the work is performed, where contributions are paid to a complying superannuation fund, whereby the sacrificed salary is permanently foregone.
• Salary sacrifice (other employee benefits): This refers to an effective salary sacrifice arrangement, entered into before the work is performed, for benefits other than for superannuation, where the sacrificed salary is permanently foregone. Examples include novated lease, gym membership, workplace giving donations, car, property (goods, land, buildings, shares and bonds), expense payments (loans, school fees, childcare costs and home phone costs) and work-related items such as portable electronic devices and equipment.

If salary sacrifice arrangements have been made where the contributions are paid to a super fund, we strongly recommend using the system default deduction category for Salary Sacrifice Super. Alternatively if the salary sacrifice arrangements are for benefits aside from superannuation, please ensure to use the Salary sacrifice (other employee benefits) classification. This article has more information on the deduction categories available.

Salary sacrifice super (RESC) deductions are also discussed in the audit section further below.

5. Audit salary sacrifice super/RESC

We 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 (i.e. other than to the super fund) will result in employee amounts not being reported correctly on their Income Statement 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. 
• Once any corrections required are made, generate the 'Super Contributions Report' again and ensure the total amount matches the 'Deductions Report'.

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. 

6. Finalise & Reconcile 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 lodge your finalisation event and then have to process adjustment pays, you will be required to lodge an amended finalisation event so we strongly suggest you hold off on commencing the finalisation 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 2023/24 financial year will only include earnings etc from pay runs paid within that financial year. For example:

• Pay run period ending 29/6/2024, PAID 30/6/2024 will be included in the 2023/24 financial year.
• Pay run period ending 29/6/2024, PAID 1/7/2024 will not be included in the 2024/25 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 2/7/2022, paid 3/7/2022. 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 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. 

7. Lodging your finalisation event

Prior to lodging your finalisation event, you should reconcile your financial year data. Refer to the End of Year Reconciliation article for instructions on how to do this.

Once you have completed the steps above, you will be ready to create the end of financial year finalisation event. There are two ways to create a finalisation event. They are:

1. Using the STP EOFY Wizard; or
2. Via an update event.

Either option can be used to fulfil your end of year processing obligations however we have specifically built the STP EOFY Wizard to simplify the process. Additionally, the STP EOFY Wizard provides more functionality over an update event, including:

• Sending notification emails from the platform once the finalisation event has been successfully lodged;
• The option to process an event encompassing all pay schedules, as opposed to creating an event for each individual pay schedule. This functionality is restricted to businesses with less than 2000 active employees; and
• Accessing theamended finalisation event wizard if further finalisation events are required. 

You need to make a finalisation declaration by 14 July however, it is important that you finalise your employees' data by 14 July if you can, and let your employees know when you have (by sending notifications), so they can lodge their income tax returns.

PLEASE NOTE: Employees will NOT be able to access their Income Statements from their employee portal or WorkZone. They will only be available via the employee's myGov account. 

Finalising Closely Held Employees

From 1 July 2021, businesses were required to report closely held employees (payees) via STP.

Closely held payees who are reported on a quarterly basis will be included in a separate finalisation event at the end of the financial year. For more information, see here.

Closely held employees who are reported on a 'per pay run' basis will automatically be included in the standard finalisation event with arm's length employees.