End of Financial Year Guide 2020/2021 - Payment Summaries – Roubler

Note: This only applies to businesses that are exempt from reporting STP, and have therefore chosen not to during the financial year. For the 2020/21 financial year, exemptions only apply to:

WPN holders (until 1st July 2022); or
Closely held employees of businesses with 19 or less employees (but only for the closely held employees); 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 2020/2021 financial year, generating and lodging your employees' payment summaries and getting ready for the 2021/2022 financial year.

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 2021/2022: A few notes on changes/updates being introduced in the new year and pointers on setting up for STP.

1. Housekeeping

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. If your business contains a combination of closely held employees and non-closely employees (ie arms length employees), you should take note of those employees who are classified as closely held as you will only be able to generate payment summaries for those employees.

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
email
tax file number
closely held employee

Ensure you also include employees terminated in this financial year when generating the report as they may also have payment summaries that need to be issued.

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 import the updated file.

Review ATO settings

Ensure your ATO settings are up to date. You can do this by going to Management > Payroll > Payroll Settings > ATO Supplier 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 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.

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.

Screen_Shot_2021-06-20_at_9.22.10_am.png

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.

Lastly, you will notice the additional settings that appear (as per below) when you tick 'Yes' to being exempt from FBT. Please be aware that we will be retiring these settings in due course as they have no bearing on how the employee's RFBT amount is displayed on the payment summary. In the meantime, if you do tick 'Yes' to the FBT exemption, you will also be required to select the organisation type.

Screen_Shot_2021-06-20_at_9.35.40_am.png

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):

Screen_Shot_2020-05-31_at_5.25.32_pm.png

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 (Meals)':

Special note on JobKeeper and JobMaker:

Provided you have set up JobKeeper and JobMaker payments correctly, they will be reported and appear correctly. If you are using the system-generated JobKeeper/JobMaker pay categories, the correct STP classifications have already been applied and no further audit will be required.

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 payment summary:
Screen_Shot_2021-06-20_at_10.19.26_am.png
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:

Screen_Shot_2021-06-20_at_10.23.32_am.png

Please note: Do not change the initial financial year to the 2020/21 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 2021/21 FY and want to capture all opening balances into the employee payment summaries.

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:

Screen_Shot_2021-06-20_at_10.33.31_am.png

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 2020/2021.

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'.

Fixing RESC amounts incorrectly entered via a Pay Run

You will know that the issues stem 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:

Screen_Shot_2020-06-03_at_12.16.23_pm.png

You can fix this directly within the 'Payment Summaries' screen. To do this:

Select the "Actions" > "Correct RESC values" option:
Select the employee you need to make the correction for and either one of, or any, relevant deduction categories:
Show deductions - will display a list of all the incorrectly allocated deductions for the current financial year. Once the relevant deduction/s have been selected, a ‘Change the payment method of these deductions to this superfund’ section will appear with a drop-down list of all the super funds that are listed for the employee. Once the required super fund has been selected click on the ‘Change payment method’ button:
Click on 'Yes' to confirm the number of deductions and the super fund they will be allocated to. NOTE - this action cannot be undone!

Once the confirmation modal is closed the payment summary will update automatically.

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 InclusionsReport 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.

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.

Please Note: The date the pay run is PAID determines which financial year that pay run applies to. Payment summaries generated for the 2020/21 financial year will only include earnings etc from pay runs paid within that financial year. For example:

Pay run period ending 29/6/2021, PAID 30/6/2021 will be included in the 2020/21 financial year.
Pay run period ending 29/6/2021, PAID 1/7/2021 will not be included in the 2020/21 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 2/7/2021, paid 3/7/2021. 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 3/7/2021.

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 2021/2022

There are several considerations for the new financial year:

Single Touch Payroll

Micro employers and businesses with closely held employees are no longer exempt from STP reporting in the 2021/2022 financial year. As such, and if not done already, you will need to enable STP and connect your software Id to the ATO. More details around the setup process can be found by accessing our STP Registration Wizard article.

Although STP exemptions still exist for WPN holders, you can choose to commence reporting earlier. Please note however 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 (and have been done so already). Please note that any pay runs with a date paid of 1/7/2021 or later will use the FY2021/2022 tax tables automatically.

Superannuation updates

The Superannuation Guarantee Contribution (SG) percentage will increase to 10%, effective for all pay runs with a date paid on or after 1 July 2021. 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% 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.

The maximum quarterly contribution base will increase to $58,920. This increase will automatically apply to all employees who are currently on the default contributions base, from 1/7/2021. Employees that aren't on the default setting will not be updated so you will need to do this manually.

The concessional contributions cap is increasing to $27,500 for all age groups. Any employee who has recurring salary sacrifice deductions paid to a super fund should be reviewed in light of this. Further information on concessional contributions can be found here.

Processing super

If you want super contributions to be included in the 2020/2021 financial year (for tax reasons), the contributions need to reach the super funds by 30 June 2021.

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 2021.

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 2021. 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.

Award updates

The Fair Work Commission handed down their annual wage review decision on 16 June 2021. A summary of the decision can be found here. Basically, a 2.5% increase will be applied to the national minimum wage. The new national minimum wage will apply from your first full pay period on or after 1 July 2021. This means if you have a weekly pay period that starts on Mondays, the new rates will apply from Monday 5 July 2021.

This increase will also apply to the modern award wages, but in 3 different stages. Most awards will increase from the first full pay period on or after 1 July 2021. The increase for the General Retail Industry Award [MA000004] will apply from the first full pay period on or after 1 September 2021. The following 21 awards will increase from the first full pay period on or after 1 November 2021:

For customers using our pre-built modern awards, updated versions of these award packages will be published on or before the effective increase date, with the applicable rate changes included.

ATO vehicle allowance rates update

The ATO-approved vehicle allowance rates for 2021-2022 will remain at 72c per kilometre. Please refer to the ATO website for further information.

If your business has set its own vehicle allowance rates, you will need to ensure you are no paying no less than the ATO approved rate.

If you have any questions or feedback please let us know via support@roubler.com.

Articles in this section

End of Financial Year Guide 2020/2021 - Payment Summaries