Closing the year-end payroll in Single Touch Payroll (STP) is a meticulous task that requires thorough attention to detail and strict adherence to the Australian Taxation Office (ATO) requirements. This comprehensive checklist covers each essential step, ensuring a smooth and compliant year-end payroll process.
Review and Update Employee Information
The foundation of accurate payroll reporting lies in the correct and up-to-date employee information.
verify Personal Details
- Names and Addresses: Confirm that all employee names and addresses are current. Incorrect details can lead to discrepancies and compliance issues.
- Contact Information: Ensure that phone numbers and email addresses are up-to-date for all employees.
Check Tax File Numbers (TFNs)
- Correct TFNs: Validate that each employee has provided the correct Tax File Number. TFNs are crucial for accurate tax reporting and compliance.
Confirm Employment Status
Employment Categories: Ensure the correct classification of employment status for all employees, whether full-time, part-time, casual, or contractor. This classification affects payroll calculations and reporting.
Reconcile Payroll Records
Reconciliation of payroll records ensures that the financial records align with actual payments made to employees.
Gross Wages Reconciliation
- Total Gross Wages: Verify that the total gross wages reported in your payroll system match the figures in your financial records. Discrepancies must be identified and resolved.
PAYG Withholding Reconciliation
- PAYG Withholding Amounts: Check that the Pay As You Go (PAYG) withholding amounts are accurate and consistent with amounts reported to the ATO.
Superannuation Reconciliation
- Superannuation Contributions: Ensure that all superannuation contributions are calculated correctly and paid on time. Reconcile these contributions with your payroll records.
Process Final Pay Runs
Processing final pay runs for the financial year is crucial to ensure all employee payments are accurate and accounted for.
Complete Regular Payments
- Final Pay Runs: Conduct all remaining pay runs up to the end of the financial year, ensuring accuracy in payments.
Adjust Leave Balances
- Accurate Leave Records: Verify that all leave balances, including annual leave and sick leave, are correct. Adjust any discrepancies to reflect accurate leave records.
Handle Termination Payments
- Termination Payments: Process final payments for any terminated employees, ensuring that all accrued leave and entitlements are included.
Superannuation Compliance
Accurate superannuation reporting is vital for compliance and ensuring employee entitlements.
Superannuation Contributions
- Correct Calculations: Ensure all superannuation contributions for the financial year are calculated accurately and paid on time.
Reconciliation
- Superannuation Records: Reconcile superannuation payments with your payroll records to identify and resolve any discrepancies.
Make Necessary Adjustments
Make any necessary adjustments or corrections to previously reported amounts before submitting the finalisation declaration.
Correcting Errors
- Identify and Correct: Identify and correct any errors made during the year in payroll reporting.
Adjustments
- Reconcile Discrepancies: Make adjustments for any discrepancies found during the reconciliation process to ensure accurate reporting.
Lodge STP Finalisation Declaration
Lodge Finalisation Declaration
- Submit Declaration: Use your STP-enabled software to lodge the finalisation declaration with the ATO. This declaration signifies that you have completed your payroll reporting for the financial year.
Review Before Submission
- Data Review: Thoroughly review all payroll data for accuracy before lodging the declaration. Ensure there are no outstanding pay runs or necessary adjustments.
Review Employee Income Statements
Make any necessary adjustments or corrections to previously reported amounts before submitting the finalisation declaration.
Correcting Errors
- Identify and Correct: Identify and correct any errors made during the year in payroll reporting.
Adjustments
- Reconcile Discrepancies: Make adjustments for any discrepancies found during the reconciliation process to ensure accurate reporting.
Report Fringe Benefits Tax (FBT)
If your business provides fringe benefits to employees, accurate reporting is required.
FBT Reporting
- Inclusion in Reporting: Ensure that any fringe benefits provided to employees are included in the year-end reporting.
Gross-Up Amounts
- Calculate Correctly: Calculate and report the correct gross-up amounts for FBT if applicable.
Communicate with Employees
Effective communication with employees about their income statements and year-end processes is crucial.
Inform Employees
- Notification: Notify employees that their income statements are finalised and available in their myGov accounts.
Provide Assistance
- Support Access: Offer assistance to employees who may have questions or need help accessing their income statements.
Feeling overwhelmed? We are here to help. Reach out to our team, and we will guide you through this process.
Additional Considerations
STP Phase 2 Compliance
Ensure compliance with any new STP Phase 2 requirements, such as additional reporting details.
New Reporting Requirements
- Detailed Reporting: STP Phase 2 includes more detailed reporting requirements, such as separating different types of payments and including additional employee information.
Software Capabilities
- Update Software: Verify that your payroll software can handle the additional reporting requirements of STP Phase 2.
You can find more details on the ATO website here.
Stay Updated with ATO Guidelines
Regularly check for updates and guidelines from the ATO regarding STP and year-end reporting.
Stay Informed
- Check ATO Updates: The ATO frequently updates its guidelines and requirements for STP. Stay informed by regularly checking the ATO website and subscribing to relevant updates.
Ensure Compliance
- Adhere to Guidelines: Ensure that your payroll processes and reporting are always in compliance with the latest ATO guidelines.
Summary
Closing the year-end payroll in Single Touch Payroll (STP) is a detailed and complex process. This expanded checklist will help ensure that all steps are completed accurately and in compliance with ATO requirements. Regular reviews, accurate record-keeping, and effective communication with employees are key components of a successful year-end payroll process.
Need help in year-end payroll closing? Please book a free 30-minute consultation session with our team where we will answer your questions about this process.
