This article is relevant for employers that have been reporting to the ATO for Single Touch Payroll (STP) during this financial year, as well as all businesses not exempt from STP reporting. For the 2021/22 financial year, STP reporting exemptions only apply to:
- WPN holders (until 1st July 2023); or
- Businesses that have been granted a deferral or special exemption from the ATO.
This article will guide you through the process of wrapping up the 2021/2022 financial year, lodging the finalisation declaration and getting ready for the 2022/2023 financial year.
This article is broken down into the different phases of year end processing, as follows:
- Preparation: This covers off the recommended checks and reconciliations that should be completed to ensure all business and employee details are correct prior to lodging the finalisation event(s) to the ATO.
- Lodging finalisation event: This includes sending notifications to employees and how to amend any employee earnings already lodged via a finalisation event.
- Preparing for FY 2022/2023: A few notes on updates being introduced in the new financial year.
1. Preparation
These steps should be taken prior to lodging your finalisation event:
- Review employee details
- 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. Having an email address on record for an employee will allow you to send a notification email directly from the platform to your employees after you have lodged the finalisation event to notify them that their Income Statement is 'Tax ready'.
Additionally, check that the employee's address is complete and correct as this will trigger a validation and prevent the finalisation event from being lodged unless its fixed. 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 need to complete a separate finalisation event for those being reported on a quarterly basis. Also, keep note if you have any foreign employees, as Foreign Tax Paid will also need to be reported via the finalisation event.
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
- Single touch payroll
Ensure you also include employees terminated in this financial year when generating the report as they may also be included in the finalisation event.
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 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 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.
If a business is exempt from FBT under section 57A of the Act, the employee's whole RFBT amount will be reported as tax-free. If the business is not exempt from FBT under section 57A of the Act, the employee's whole RFBT amount will be reported as taxable.
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.
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 EOFY Reconciliation article - go to "Incorrect pay category payment classification" in the What could cause a positive variance section.
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 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.
Salary sacrifice super (RESC) deductions are also discussed in the audit section further below.
Check 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 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 balance amounts in the finalisation event.
If there are any opening balances for deductions that should be reported as Reportable Employer Super Contributions (RESC) on the Income Statement, 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
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. If however, payments were made before these changes (or deductions were made using a custom category) you will need to unlock the pay run and change the category used. If you are unable to unlock and edit the pay run please contact Support using the email at the bottom of this article.
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 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 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 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.
Lodging your finalisation event
Prior to lodging your finalisation event, you should reconcile your financial year data.
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:
- Using the STP EOFY Wizard; or
- 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 the amended 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.
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.
3. Preparation for FY 2022/2023
There are several considerations for the new financial year.
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 FY2022/2023 tax tables automatically.
Superannuation Updates
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.
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.
Processing super
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.
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.
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.
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 75c per kilometre. Please refer to the ATO website for further information.
If your business has set it's own vehicle allowance rates, you will need to ensure you are not paying less than the ATO approved rate.
If you have any questions or feedback please let us know via support@roubler.com.
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