8. End of Year Reconciliation - STP

Reconciling employee earnings reported via Single Touch Payroll (STP) with employee earnings processed in finalised pay runs is a crucial part of wrapping your End of Financial Year (EOFY). You can complete the reconciliation using a Finalisation Event; however, we recommend that you create an Update Event as it will make sure that: 

• We will include any employees who you previously terminated and you can add the Reportable Fringe Benefits (RFB) amounts for them if required
• If there are changes made to pay category or deduction category settings, you can lodge the update event to refresh the data for previously terminated employees. 

For businesses with more than 2,000 employees and more than one default pay schedule, i.e., the pay schedule assigned to an employee via their Pay Run Defaults page. You will need to create and lodge a finalisation event for each schedule. Therefore, you will also need to reconcile each event/pay schedule separately.

Once you have completed the reconciliation and the variance is $0, we recommend that you lodge the Update Event to make sure the full Year to Date (YTD) data is correct before proceeding with the finalisation event. 

Where do I start?

You can download the STP Excel report directly from the update event. Click on the Download button from within the event to see the following two reporting options

Excel

The report will contain the information for only the employees that you included in the update event. The totals in this report will match the totals that appear at the bottom of each column in the user interface for the finalisation event. 

Excel (YTD)

You will use this report if you need to reconcile what will be reported via STP for the financial year against the payments processed in your finalised pay runs. The Year to Date (YTD) report lists all employees included in a successfully lodged STP event for the specified pay schedule you have used to create the finalisation event. It includes any employees that you previously marked as final during the financial year and so are not appearing in the finalisation event. You will know who those employees are as we will list them in the finalisation event wizard. 

Reconciling using the Excel (YTD) report

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

STP year to date

It contains all payroll earnings reported for all employees, attached to the selected pay schedule, via STP for the financial year.

Itemised gross

It contains the earnings reported via STP for all employees for the financial year as above, but separated into individual payment classifications.

ETP

It contains all ETP earnings reported for all employees attached to the selected pay schedule via STP for the financial year.

Payroll YTD

It contains all payroll earnings processed in your finalised pay runs for all employees whose primary pay schedule is the pay schedule selected when creating the event. To be clear, if you have created a 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 you included the employee in any ad hoc pay run throughout the financial year. It 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

It compares the total YTD taxable earnings between the STP YTD and the Payroll YTD worksheets. Which is basically a comparison of what you reported via STP and what you processed in your 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 the discrepancy before proceeding with the finalisation.

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

Does the STP YTD tab include an amount, other than zero, in the Pre-Tax Deductions (Not classified) column?

In STP Phase 1, you where not required to report on salary sacrifice amounts. Rather, you would reduce an employee's gross amount by any salary sacrificed amounts and it was the post-sacrificed gross amount that you 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 Two reporting requires you to itemise salary sacrifice amounts, we added two 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).

You should review all pre-tax deduction categories that reduce taxable earnings. You would do this to make sure that these deductions are mapped to either the Salary sacrifice superannuation or Salary sacrifice (other employee benefits) classification. Note you can not classify Pre-Tax Deductions as Default when reporting for STP Phase 2.

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 closely held employees have not had their quarterly STP reported yet. Compare the earnings between the Payroll YTD and STP YTD workbooks to confirm if this is the cause. If necessary, complete the quarterly lodgement as outlined here

 Pay category payment classification

There may be instances where you created Pay as You Go (PAYG)-exempt pay categories to reimburse expenses and you paid them 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 and if you set it to the Default option. We will report any earnings associated with pay categories classified as Default via STP.

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

• If all affected employees are listed in the finalisation event, then you just need to refresh the data. Then download an updated version of the Excel (YTD) report and check that there is no longer a variance before proceeding.
• If you see not all affected employees listed in the finalisation event, you may have finalised them in a prior event. If so, 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. Once you lodge the update event successfully, refer 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 we highly recommend to compare each employee's earnings stated between the STP YTD and Payroll YTD worksheets. It will help in pinpointing the specific affected employee to then investigate further where the issue may lie.

The general rule of thumb is if the variance is a negative amount, it means what you reported via STP which includes the finalisation event, is less than what you processed in pay runs. If the variance is a positive amount, then the opposite applies; i.e., what you 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. Then, you many not have to include one or more of these employees in another event.

As a result, the employee 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 and 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 before lodging the finalisation event. Then, once confirmed that you have lodged the update event, refer 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 lodging the finalisation event.

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

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