End of Year Reconciliation - Single Touch Payroll

A crucial part of wrapping up EOFY is reconciling employee earnings reported via STP during the financial year with employee earnings processed in finalised pay runs for that same financial year. 

When creating a finalisation event, you can select to do this for all pay schedules (option only available for businesses with less than 2000 active employees at the time of running the event) or you can do this on a per pay schedule basis. This means that if you have more than one default pay schedule (ie, pay schedule assigned to an employee via their Pay Run Defaults screen) you will need to create and lodge a finalisation event for each one and therefore will also need to reconcile each event/pay schedule separately. 

You can download the STP excel report directly from the finalisation event. Click on the "Actions" button from within the event to see the following 2 reporting options:

1. Excel - this report will contain the information for only the employees that were included in the finalisation event. The totals in this report will match the totals that appear at the bottom of each column in the UI for the finalisation event. 
2. Excel (YTD) - this is the report you will need to reconcile what will be reported via STP for the financial year against the pays processed in finalised pay runs. The YTD report lists all  employees included in a successfully lodged STP event for the specified pay schedule(s) you have used to create the finalisation event. This includes any employees that had previously been marked as final during the financial year and so are not appearing in the finalisation event. You will know who those employees (that are not appearing in the finalisation event) are as they will be listed in the finalisation event wizard under the following warning banner:

Reconciling using the Excel (YTD) report

Upon opening the Excel (YTD) report, you will notice 4 worksheets:

• STP Year To Date: This contains all payroll earnings reported for all employees (attached to the selected pay schedule/s) via STP for the financial year;
• Itemised gross: This contains the earnings reported via STP for all employees for the financial year (as above), but separated into individual payment classifications.
• ETP: This contains all ETP earnings reported for all employees (attached to the selected pay schedule/s) via STP for the financial year;
• Payroll YTD: This contains all payroll earnings processed in finalised pay runs for all employees whose primary pay schedule is the pay schedule selected when creating the finalisation event. To be clear, if you have created a finalisation event for the pay schedule 'Monthly', any employee whose default pay schedule is 'Monthly' will appear in the worksheet. Additionally, all earnings processed in any finalised pay run for that employee will appear, even if the employee has been included in any ad hoc pay run throughout the financial year. This will also include closely-held employees reported on a quarterly basis, as although they are reported separately to non-closely held employees, they must still be reported via STP;
• Variance: This compares the total YTD taxable earnings between the 'STP YTD' and the 'Payroll YTD' worksheets, which is basically a comparison of what has been reported via STP and what has been processed in pay runs. If the variance amount is reported as $0, this confirms all figures match and you can comfortably proceed with lodging your finalisation event. If the variance amount is greater than a few dollars (we say a few dollars to allow for rounding), you will need to investigate further and identify/resolve the discrepancy before proceeding with the finalisation

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What are my next steps if there is a positive variance? 

What could cause a negative variance?

Can I access the Excel (YTD) report in an amended finalisation event?

What are my next steps if there is a variance? 

In Phase 1, salary sacrifice amounts were not required to be reported. Rather, an employee's gross amount was reduced by any salary sacrificed amounts and it was the post-sacrificed gross amount that was then reported through STP. Reporting salary sacrifice is a new requirement introduced in STP Phase 2, which means the gross amount reported will be the pre-sacrificed amount.

As Phase 2 reporting requires salary sacrifice amounts be itemised, we added 2 new classification options to the deduction category settings to meet these requirements. The new options are as follows:

• Salary sacrifice (superannuation); and
• Salary sacrifice (other employee benefits) 

Users should review all pre-tax deduction categories that result in a reduction of taxable earnings to ensure that these deductions are mapped to either the ‘Salary sacrifice superannuation’ or 'Salary sacrifice (other employee benefits)' classification, as appropriate. 

Are any of your employees classified as closely held and are being reported on a quarterly basis? 

If yes, a positive variance may mean that the closely held employees have not had their quarterly STP reported yet. Compare the earnings between the Payroll YTD & STP YTD workbooks to confirm if this is the cause. 

 Pay category payment classification

There may be instances where PAYG exempt pay categories are created to reimburse expenses and are paid to an employee when processing their normal pay. If this payment should not form part of an employee's wages/salary, you will need to review the payment classification of that pay category if it is currently set to 'Default'. Any earnings associated with pay categories classified as 'Default' will be reported via STP. 

Reimbursements typically are not payroll related and should be classified as 'Exclude from Payment Summary (Income statement)' although such assessment should be undertaken by the business. If a pay category's payment classification has been set up incorrectly, you must first make the required correction to the classification. Then, what you do next depends on whether the affected employees are included in the finalisation event or not:

1. If all affected employees are listed in the finalisation event, then you just need to refresh the data. This is done via the "Actions" button in the finalisation event, by selecting "Refresh Data". Then download an updated version of the Excel (YTD) report and check that there is no longer a variance before proceeding. 
2. If not all affected employees are listed in the finalisation event, (they may have been finalised in a prior event) then you should create and lodge an update event for the affected pay schedule(s) before lodging the finalisation event. If the affected employee/s do not appear in the update event, you can manually add them by using "Actions" > "Add employee". Once the update event has been lodged successfully, refer back to the created finalisation event and refresh the data. Download an updated version of the Excel (YTD) report and check that there is no longer a variance before proceeding with the finalisation event. 

If none of the above prove fruitful, then it is highly recommended to compare each employee's earnings stated between the STP YTD and Payroll YTD worksheets. This will assist in pinpointing the specific affected employee(s) to then investigate further where the issue may lie. 

General rule of thumb is if the variance is a negative amount, this means what has been reported via STP (which includes the finalisation event) is less than what has been processed in pay runs. If the variance is a positive amount then the opposite applies, ie what has been reported via STP (which includes the finalisation event) is higher than the taxable earnings processed in pay runs.

What could cause a negative variance?

The most common reason for a negative variance is that one or more employees were included in a failed or partially successful pay event and so their YTD earnings were not reported. Subsequently, one or more of these employees may not have been included in another event. 

As a result, the employee/s may have stopped working and there were no further earnings to report, or they were marked as 'is final', which meant they were either: 

• Never reported successfully via STP or;
• Their current YTD earnings were not reported. This would result in an STP YTD amount that is less than their Payroll YTD amount.

If this is the case, you should create and lodge an update event for the affected pay schedule(s) before lodging the finalisation event. Then, once confirmed that the update event has been lodged successfully, refer back to the created finalisation event and refresh the data (using "Actions” > "Refresh Data"). Download an updated version of the Excel (YTD) report and check that there is no longer a variance before proceeding with lodging the finalisation event.

Can I access the Excel (YTD) report in an amended finalisation event?

Yes you can. The exact same process and format of the report as described above is available in all amended finalisation events. 

For more information about end of year processing, refer to our STP EOFY Guide.

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