Does your business pay wages?

If you answer yes to this question – you should carry out a Wage Reconciliation at the end of the financial year.  It is important this is done prior to issuing your employee PAYG Payment Summaries or, if you have opted into STP, prior to doing your finalization declaration to the tax office. 

Why is a Wage Reconciliation Important? 

It’s important you complete a reconciliation (or cross-check) to ensure all the following figures agree: 

  1. wage and PAYG withholding tax figures you report to the tax office on your PAYG Payment Summaries or when finalising your year for STP. 
  2. W1 and W2 figures that you have reported to the tax office on your business activity statements 
  3. The wages figures reported in your profit and loss  
Potential Implications of Unbalanced Wages 

If any of the above figures don’t agree it could indicate an error in your payroll.   

An error can have serious implications.   

Here’s some examples of errors we’ve seen in the past when wages and taxes are not cross-checked before year-end payroll reports are lodged: 

  • An employee’s tax was incorrectly under reported on their payment summary meaning the employee ended up with an unexpected tax bill  
  • Bonuses, overtime and annual leave payments were omitted from an employees gross wage meaning that the payment summary had to be corrected and re-issued  
  • Standard employer super contributions incorrectly reported at the RESC box on the payment summary resulting in some serious tax implications for the employee  
  • Wages reported on payment summaries compared to actual wages paid were different meaning that declarations made to Workcover were incorrect  – if the correct wages are not declared to Workcover it could mean the business is under-insured or paying an unnecessarily high premium 
Steps Involved 

It is a relatively easy process and involves the following steps: 

  1. ensure all transactions up to 30 June have been allocated and your bank account/s is reconciled to the end of the financial year 
  2. ensure your final pay run for the financial year has been processed. 
  3. ensure your wages payable/ payroll clearing account(liability account on balance sheethas a nil balance at the end of the financial year 
  4. ensure your PAYG withholding payable account agrees to the amount reported on your June quarterly business activity statement. 
  5. confirm the following reports balance to each other:
  • profit and loss wages expense account 
  • = gross wages to be shown on payment summaries 
  • = gross wages shown at W1 on your BASs during the financial year 
  1. confirm the following reports balance to each other:
  • credit entries coded to ledger account for PAYG withheld liability account 
  • = tax withheld to be shown on payment summaries. 
  • = tax withheld shown at W2 on your BASs during the financial year 
Need Software Specific Guidance?

Please see the links below for guidance specific to your software: 

Xero – https://www.xero.com/content/dam/xero/pdf/au-eofy-payroll-checklist.pdf 

MYOB – http://files.myob.com/help/AccountRight/Guides/MYOB-EOPY-GUIDE-2019.pdf?_ga=2.211529493.1866730375.1560927873-645184535.1511910865 

Quickbooks – https://quickbooks.intuit.com/au/resources/product-updates/end-financial-year-payroll-procedures/ 

ATO Reporting Deadlines 

Just a reminder that there are deadlines by which you need to finalise your payroll obligations.  For the 19/20 financial year they are as follows: 

If NOT using STP: 

  • payment summaries to employees by 14 July 2020 
  • payments summaries and annual statement to ATO by 14 August 2020 

If using STP: 

  • 20 or more employees – finalisation declaration by 14 July 2020 
  • 19 or less employees – finalisation declaration by 31 July 2020 
Need Further Assistance? 

We help many clients at this time of year with their year-end payroll, Workcover and Contractor reports ranging from a short refresher on how to do this correctly yourself through to taking care of all the paperwork and lodgements.  If you would like assistance to ensure you are meeting all your various obligations correctly and on time please contact one of our team for assistance. 

 

 

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