Payroll & tax as year-end looms

EOFYS has become a widely recognised acronym but for hard-working payroll professionals, the end of the financial year isn’t about getting a deal on a car or sofa. It’s the last chance to get on top of niggling issues that can cause problems down the line, before the cycle starts all over again. What are some key considerations for employment taxes?

1.      Finalising STP reporting

Single Touch Payroll (STP) reporting must be finalised by 14 July. While this is a routine matter for most payrolls, it’s timely to consider any complexities that may affect the correctness of payments. Has the accuracy of payroll in capturing contractual entitlements and the quirks of enterprise agreements and awards been tested? Have overpayments been identified and corrected? Are there any new wage types that should be introduced for the new financial year?

2.      Year-end reconciliation of super

Super guarantee is the highest profile area of scrutiny by the ATO and data matching capabilities are increasing all the time. Super remains on a quarterly cycle (pending next year’s introduction of payday super when contributions will be required within one week of payday). Many employers also factor in the annual concessional contributions cap and maximum contribution base. Year-end is an opportunity to check both quarterly and annual contributions.

3.      Reportable fringe benefits amounts (RFBA)

These must also be reported by 14 July. Employees with HECS/HELP payments, child support assessments, Division 293 obligations and more are affected by RFBA and may dispute the amounts reported if it is not clear how they were determined. Therefore it’s helpful to communicate clearly well before the reporting deadline to have time to address any concerns.

4.      Salary sacrifice reconciliations

Salary sacrificed benefits will be captured in the FBT return. It is common to uncover differences in pre-and post-tax contributions that need to be reconciled via payroll. Ensuring that this reconciliation is done by year-end prevents the need to make retrospective adjustments and avoids shortfalls in contributions compounding and causing potential issues in the event of employment ending.

5.      Payroll tax

Year-end payroll tax returns are typically due by 21 July. This is an important opportunity to revisit monthly reporting and make any adjustments. It is opportune to address more complex matters such as expatriate and ESS reporting, which is likely to differ from STP reporting. A review of accounts payable to identify contractors who may be deemed employees is important. Correctly attributing wages to states for mobile employees can be another area to consider.

6.      ESS reporting

Employers who provide shares to employees must provide an ESS statement by 14 July and the annual ATO report is due by 14 August. Trouble spots can include correctly valuing options, recognising the impact of employees with overseas work in the grant to vesting period and correctly identifying situations where deferral of tax isn’t available.