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Payroll compliance is not a project with a completion date. It is an annual cycle with a small number of fixed points, a continuous reporting obligation running underneath, and a set of things that quietly go wrong if nobody checks them.
Businesses that find compliance manageable are not working harder than everybody else. They have converted it into a rhythm, so each obligation is met at a point in the year when there is capacity to meet it properly rather than in a concentrated scramble at the end.
This article sets out that rhythm. What happens when, what to check at each point, and where the recurring failures come from. It is general guidance rather than advice for your circumstances, and anything genuinely uncertain in your business is worth confirming against your own facts.
Before the calendar, it helps to separate what happens every cycle from what happens periodically, because the two need different treatment.
Single Touch Payroll reporting is the continuous one. Every pay event must be reported to the Australian Taxation Office on or before the day of payment, in the Phase 2 format with income disaggregated into components. That is an operational constraint on every run rather than an administrative task.
PAYG withholding is calculated and reported on every cycle and remitted according to your reporting frequency, which is monthly or quarterly depending on your withholding volume.
Payslips must be issued within one working day of payment, with the prescribed content. A payslip missing required information is a breach even where the payment itself was correct.
And record keeping runs throughout. Fair Work requires payroll records kept for seven years, in a legible form, covering more than most businesses assume including hours where they are relevant to an entitlement.
Superannuation drives the quarterly cycle and it is the obligation where lateness is most expensive relative to the amount involved.
Contributions must be received by the fund by the quarterly due date, not merely sent by it, and clearing house processing sits inside that window. A payment made on the deadline frequently arrives late, and late is late regardless of intent.
The consequence of lateness is disproportionate. The superannuation guarantee charge applies, it is not deductible, and it carries interest and an administration component. A modest shortfall paid slightly late costs considerably more than the original contribution would have.
The practical discipline is to pay with margin rather than to the deadline, and to build the reminder into the finance calendar rather than relying on somebody remembering. Businesses that have been caught once generally never are again, which suggests the lesson is expensive rather than difficult.
The quarter is also a sensible cadence for a short review of anything that has changed. New allowance types, new employment arrangements, anyone whose duties have shifted materially.
The most useful change most businesses could make is to start their end of year preparation in the first months of the calendar year rather than in June.
Problems found in April or May can be corrected in the ordinary course of a pay run. The same problems found in late June have to be corrected under deadline pressure, sometimes after the final pay of the year has already gone out.
The other reason is availability. Everybody who could help you, whether an accountant, a payroll provider or a systems partner, is busiest in June for exactly the same reason you are.
Use this window to reconcile payroll to the general ledger, to check that Single Touch Payroll year to date figures match what your system holds, and to review allowance treatments. Each of those is a genuine investigation if something is wrong, and investigations need time.
This is the foundational check, and it is worth doing properly rather than approximately.
Total gross wages per your payroll records should agree with wages expense in the ledger. PAYG withheld should agree with the liability account and with what has actually been remitted. Superannuation expense should agree with what has been calculated and what has been paid.
Where differences exist, they need explaining rather than adjusting away. A difference usually means a journal was posted incorrectly, a payment was coded to the wrong account, or there is a timing effect that is legitimate and should be understood.
Businesses running payroll on the same platform as their ledger largely avoid this step, because the posting happens as part of the pay run rather than as a separate journal. Where payroll sits in a separate system, this reconciliation is the single most important item on the annual list.
Because Single Touch Payroll reports each pay event, your year to date figures with the Australian Taxation Office should already be current. The task is confirming that rather than producing it.
Compare the year to date totals in your payroll system against what has actually been reported and accepted. Any pay event that failed submission and was not resubmitted creates a gap, and those gaps are easy to miss because a failed submission does not stop the pay run.
Check that everybody who worked during the year appears, including anyone who left partway through and anyone paid only once.
And confirm the disaggregated components look right. Allowances reported by type, overtime separated from ordinary earnings, paid leave appearing as leave rather than folded into gross. Phase 2 exposed these categorisations directly, which is uncomfortable the first time and genuinely useful.
Allowances are the most common source of categorisation error, because they accumulate over years and each one is decided individually at the point it was introduced.
Each allowance requires three separate decisions. Whether it is taxable, whether it forms part of ordinary time earnings for superannuation, and how it must be reported under Phase 2.
Those three do not always move together, which is exactly why mistakes happen. An allowance can be taxable and not attract superannuation, or the reverse, depending on its nature.
Take the list of allowances actually paid during the year and check each one rather than assuming the configuration is right because nobody has complained. Nobody complains about a superannuation shortfall, because it is invisible on a payslip.
The end of the financial year carries two distinct sets of work, and conflating them causes problems.
The closing set covers finalising the year just ended. Income statement finalisation for every employee who was paid during the year, including those who have left, which is a declaration that the information is correct. A last review of year to date figures per employee before finalising, since amending afterwards is possible and more work. And telling employees when it is done, because most do not know their income statement becomes available through this process rather than as a document from you.
The opening set covers preparing for the year beginning. The annual wage review outcome flows into modern award minimum rates and the national minimum wage, applying from the first full pay period on or after the first of July. Note that this is the first full pay period rather than the first pay date, which is a distinction that catches businesses out regularly.
Where you pay above award minimums, check that the increase has not eroded a margin you were relying on, since the test is against the current award rate rather than against last year's pay.
The most consequential annual check, and the one most often skipped because it is a judgement rather than a reconciliation.
Award coverage depends on the industry the employer operates in and the work the employee actually performs, judged against the award's classification structure. It does not depend on job title, on whether somebody is salaried, or on whether the work feels modern.
Classifications drift because people's duties change gradually. Somebody trained on additional equipment, given responsibility for a section, or moved into a more technical role may have moved up the classification structure without anybody revisiting their rate. That drift is normal operationally and it is an underpayment from the moment it happens.
An annual review of what people actually do against the classification they are paid under is a short exercise. Supervisors generally know exactly who has taken on more, and asking them is faster than any documentary review.
Where annualised salary arrangements exist, the required reconciliation is not optional and is frequently not performed.
Several awards permit these arrangements subject to conditions, which typically include documenting the arrangement, specifying which award provisions the salary covers, and reconciling to confirm the employee was no worse off than they would have been under the award.
The reconciliation is the entire basis on which the arrangement stands. Without it, the business has an assumption rather than a defence, and it is the first thing anybody will ask for if the arrangement is questioned.
Perform it on the required cycle, retain it, and treat a result showing a shortfall as something to act on promptly rather than to note.
An annual review of anyone engaged as a contractor is worth building into the cycle, because arrangements drift in a direction that increases exposure.
Someone engaged as a genuine contractor two years ago may now work exclusively for you, on your schedule, using your equipment, which looks considerably more like employment than it did at the outset.
The distinction turns on the substance of the relationship rather than the label on the agreement, considering control over how the work is performed, whether the person can delegate, who provides equipment, whether they bear commercial risk and whether they operate a genuine business.
There is also an extended definition of employee for superannuation purposes, which can create an obligation for some genuine contractors where the contract is wholly or principally for their labour. That catches businesses out regularly and is worth checking specifically.
Leave deserves an annual look rather than acceptance of whatever the system shows.
Check that accruals have calculated correctly, paying particular attention to part time employees and anyone whose hours changed during the year, since those are where errors concentrate. Personal and carer's leave is expressed in days rather than hours, which creates genuine complexity for variable hours staff.
Check that leave taken has been recorded against the right type, because personal leave recorded as annual leave distorts both balances.
Look at unusually large balances, both because they represent a growing liability and because an unusually large balance sometimes indicates leave taken but never recorded.
And where you operate across states, confirm long service leave accrual reflects the rules of each jurisdiction, since these differ and a multi state business is running several regimes at once.
Record keeping is treated as administrative and is actually the thing that determines whether a defensible position stays defensible.
Where a business cannot produce records, the Fair Work Act allows an employee's claim about their hours or pay to be presumed correct unless the employer can disprove it. Poor records therefore convert a correct payroll into an indefensible one.
The annual checks are that records exist for the whole year, cover what is required including hours where relevant, and remain accessible. Where a system change happened during the year, confirm that records from the previous system are still reachable, since attention usually goes to migrating what the new system needs rather than retaining what the old one held.
Seven years is a long time, and reconstructing records after the fact ranges from difficult to impossible.
The step almost everybody skips and the one that makes the following year materially easier.
Whatever you had to investigate this year, note what it was, what caused it and what you did. Whatever took longer than expected, note why. Whatever you nearly missed, note what would have caught it earlier.
That note becomes next year's checklist, and it is considerably more useful than a generic one because it reflects your business, your configuration and your recurring difficulties.
It also survives staff changes, which a person's accumulated knowledge does not. In a function where key person risk is one of the larger exposures, that alone justifies the twenty minutes.
Across businesses, the same causes appear year after year.
Assuming no award applies is first and produces the largest liabilities, because it affects every payment to every affected employee for the whole period.
Superannuation calculated on the wrong earnings base is second, and it compounds quietly every quarter until somebody checks.
Annualised salaries without reconciliation is third, and the arrangement looks compliant right up until it is examined.
Failed Single Touch Payroll submissions never resubmitted is fourth, and it is the most easily missed because nothing visible goes wrong at the time.
And incomplete records is fifth, turning every other issue into a worse problem by removing your ability to demonstrate what actually happened.
Compliance is not a state you reach and hold, because the rules change and businesses change. What you can hold is a rhythm that catches problems while they are small.
The most valuable single change for most businesses is moving the annual review forward by a couple of months, so June is execution rather than discovery.
Our guide to Australian payroll compliance covers the underlying obligations in detail, and our piece on end of financial year payroll preparation covers the June tasks specifically.
Our payroll and bookkeeping service covers running payroll on the same platform as your ledger, which removes the reconciliation step entirely, and the payroll manager guide covers the function across the rest of the year.
If you are uncertain whether your current arrangements are sound, that uncertainty is itself worth resolving. Get in touch and we can look at where you stand.
