Guide: EOFY 2021/22 - Reporting STP

Overview

Best Practice

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 wrapping up the 2021/2022 financial year, lodging the finalisation declaration and getting ready for the 2022/2023 financial year. We recommend you also refer to the EOFY STP FAQ in case you have questions along the way.

Getting Started

We broke this article down into the different phases of end-of-year processing: 

  • Preparation: This covers off the recommended checks and reconciliations. You should complete ensuring 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 2022/23: A few notes on updates being introduced in the new financial year.

Preparation

You should take these steps prior to lodging your finalisation event:

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'.

Check that the employee's address is complete and correct as, unless fixed, this will trigger a validation and prevent the finalisation event from being lodged. If your business contains a combination of closely held employees and non-closely employees (i.e. arm's length employees), note those employees who you classify as closely held as you will need to complete a separate finalisation event for those being reported quarterly. Also, keep note if you have any foreign employees, as the 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
  • Email
  • Tax file number
  • Single touch payroll

Ensure you also include employees terminated in this financial year when generating the report, as you may also include them in the finalisation event.

Warning

If you need to update any of the employee details, please log into the HR Platform, navigate to the employee’s record and make the change.

Remember that the source of truth for your employee data is in the HR Platform which automatically syncs to the Payroll platform.

In exceptional circumstances where an alternative option for the aforementioned is required, you can complete the changes individually in the Payroll platform 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, changing the spreadsheet and then import the updated file.

However, the default and best practice for your organisation is using the source of truth wherever possible.

Review FBT settings

Is your business exempt from FBT under section 57A of the FBTAA 1986? If so, ensure you have configured this via the 'ATO Settings' page. By default, the option is 'No' but it is important to review the setup here. This will help ensure you reported correctly any reportable fringe benefits amounts in the finalisation event and the employee's Income Statement. 1.png

For businesses with multiple employing entities set up, please note that the FBT setting must be  configured for each employing entity. We can do this via clicking through to the relevant employing entity via the Employing Entities submenu within Payroll Settings on your Employment Hero Payroll platform.

If a business is exempt from FBT under section 57A of the Act, the employee's whole RFBT amount is reported as tax-free. If the business is not exempt from FBT under section 57A of the Act, the employee's whole RFBT amount is reported as taxable.

Prior to 16 July 2021 there were an additional 2 sub-settings which separated out the type of organisation and the entitlement of employees to a separate cap for salary packaged entertainment benefits. It has removed these as they do not impact the reporting of RFB amounts for employees via STP (or payment summaries) 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, previously entered RFB amounts are retained despite this change;
  •  As per new STP events created, there will only be one column for RFBA.
Review pay categories

Review you have applied your pay categories to ensure the correct classification. Configure via the 'Payment Classification' field within the pay category settings:
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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. This article has more information on the disaggregation of gross income, along with descriptions of each payment classification.

PAYG Exempt pay categories:

You normally categorise a pay category set to be PAYG exempt as something other than 'Default' in the Payment Classification field in the pay category settings, e.g. Allowance or Lump Sum as two possibilities. This is because it deemed PAYG Exempt earnings 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 earnings will not appear in the Taxable Earnings total (in the payroll YTD section). However, they will appear in the Payroll Gross Earnings total (in the STP YTD section). Information about how to fix this is in our EOFY Reconciliation article.

Special note on JobKeeper and JobMaker:

Provided you have set up JobKeeper and JobMaker payments correctly, they will report and appear correctly, respectively. The correct STP classifications are applied if you are using the system-generated JobKeeper/JobMaker pay categories already 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 so the itemised deduction amounts appear separately in the Income Statement:

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As part of STP Phase 2, they have introduced several new classifications to categorise the deduction types, so it is important to ensure your deduction categories are correct.

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 before they perform the work
      • where you paid contributions 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 before they perform the work
      • 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 they have made salary sacrifice arrangements where you pay the contributions 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. 

 

Check opening balances

If you have migrated to this payroll system from another system during the financial year, it is important you have correctly set up the opening balances.

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. You will find this in the opening balances selection under Payroll Settings where you can ensure the configuration of the correct financial year: 

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Best Practice

 

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, default will tick the checkbox: 4.jpg

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 cause 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 identifying the differences, you will need to fix them. 
  • Once making any corrections, generate the 'Super Contributions Report' again and ensure the total amount matches the 'Deductions Report'.

On 4 November 2020, we changed the RESC deduction category in order to help users avoid incorrectly allocating RESC deductions to anything other than a super fund. This article provides detailed information about these changes. If, however, you made payments before these changes (or you made deductions using a custom category) you will need to unlock the pay run and change the category used. If you cannot unlock and edit the pay run, please contact Support by submitting a request. 

Finalise Pay Runs

Ensure that you finalise all pay runs with a date paid by 30 June, 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 you have processed all pays for the financial year.

Important

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 June 2022, PAID 30 June 2022 will be included in the 2021/22 financial year.
  • Pay run period ending 29 June 2022, PAID 01 July 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 02 July 2022, paid 03 July 2022. Create a pay run as normal and set the pay period ending 30 June 2022, ensuring you stipulate the date paid to be 30 June. You will then need to adjust the employee hours to reflect the hours worked for the 26 - 30 June and then complete the pay run. Then create another pay run for the period ending 02 July 2022 and adjust the employee hours to reflect the hours worked for the 1st and 2nd. Then complete the pay run using the normal date paid, being 03 July 2022. 

Lodging your finalisation event 

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

Lodging your finalisation event instructions

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 fulfil your end-of-year processing obligations. However, we have specifically built the STP EOFY Wizard to simplify the process. The STP EOFY Wizard provides more functionality over an update event, including:

  • Sending notification emails from the platform once the finalisation event is successfully lodged;
  • The option for processing an event encompassing all pay schedules, as opposed to creating an event for each individual pay schedule. It restricted this functionality 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.

Important

Employees cannot 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.

It will include closely held payees reported quarterly in a separate finalisation event at the end of the financial year. For more information, see here

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

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 (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 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. For more information, review: Annual increase to superannuation guarantee (SG) rate effective from 1 July.

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 01 July 2022. It will not update employees that are not on the default setting so you will need to do this manually.

Processing super

If you want super contributions to be included in the 2021/22 financial year (for tax reasons), the contributions need to reach the super funds by 30 June 2022.

To meet this deadline and if you're using our automated super payments functionality (i.e. Beam), your super batch will need to be successfully uploaded/paid by 3.30pm AEST on 23 June 2022. 

If you have pay runs scheduled for payment between 23 and 30 June, you can always create these pay runs in advance (by 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, i.e. 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

For customers using our pre-built modern awards, it will publish updated versions of these award packages by the effective increase date. 

ATO vehicle allowance rates update

The ATO-approved vehicle allowance rates for 2022-23 will increase to 75c 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 not paying less than the ATO approved rate.

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