EOFY Payroll Guide: Essential Tips for Payroll Specialists | ZonePayroll, Payroll NetSuite, Payroll EOFY Tasks & Checklist
End of financial year is the one point in the payroll calendar where a whole year's decisions get tested at once. Everything that was categorised correctly stays quiet, and everything that was not tends to surface in the same fortnight, usually while several other deadlines are also arriving.
The businesses that find the period straightforward are not the ones that work hardest in June. They are the ones that did the checking earlier, so June is a process rather than an investigation.
This article sets out what actually needs to happen, in roughly the order it should happen, and where the recurring problems 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.
The single most useful change most businesses could make is moving their preparation forward by a month.
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, often with adjustments that require explanation, and sometimes after the final pay of the year has already gone out.
The other reason to start early is availability. Everyone 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.
A reasonable rhythm is to begin reviewing in April, resolve what you find during May, and treat June as execution rather than discovery.
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 indicates either a journal that was posted incorrectly, a payment that was coded to the wrong account, or 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 most important thing on the list.
Because Single Touch Payroll reports each pay event, your year to date figures with the Australian Taxation Office should already reflect what you have paid. The end of year task is confirming that, not 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 every employee who worked during the year appears, including anyone who left partway through and anyone paid only once.
And confirm that the disaggregated components look right, meaning that allowances are reported by type, overtime is separated from ordinary earnings, and paid leave appears as leave rather than being 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 end of year categorisation problems, because they accumulate over time and each one gets decided individually.
Each allowance needs three decisions to be correct. Whether it is taxable, whether it forms part of ordinary time earnings for superannuation, and how it must be reported under Single Touch Payroll Phase 2.
These 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 you have 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.
Superannuation deserves particular attention because the consequences of getting it wrong are disproportionate.
Check that contributions have been calculated on ordinary time earnings rather than on gross pay, and that the earnings base includes what it should and excludes what it should.
Check that every quarter has been paid and, importantly, that each payment was received by the fund by the due date rather than merely sent by it. Clearing house processing time sits inside that window, and a payment made on the deadline frequently arrives late.
Check that new starters during the year had their fund details handled correctly, including the stapled fund check where they did not nominate one.
Where a shortfall or a late payment is identified, the position is better addressed deliberately than left, because the superannuation guarantee charge regime treats voluntary disclosure differently from a problem found later.
Leave balances are worth examining before year end rather than accepting 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.
Check that leave taken has been recorded against the right leave 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 that was taken but never recorded.
And check that any long service leave accrual reflects the rules of the relevant state or territory, since these differ and a business operating across jurisdictions is running several sets of rules at once.
Anyone who left during the year is worth revisiting, because termination is where several rules converge and errors are common.
Confirm that unused annual leave was paid out correctly, including whether leave loading applied on termination under the relevant instrument, which is not always the same as whether it applies ordinarily.
Confirm that any long service leave entitlement was handled according to the applicable state rules.
Confirm that employment termination payments were categorised and taxed correctly, since the treatment differs from ordinary income and getting it wrong affects the individual's tax position.
And confirm that the cessation reason reported through Single Touch Payroll was accurate, because it flows through to the person's dealings with other agencies.
End of year is a sensible moment to revisit anyone engaged as a contractor, because arrangements drift.
Someone engaged as a genuine contractor two years ago may now work exclusively for you, on your schedule, using your equipment, in a way that 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, and the exposure where it is wrong covers superannuation, leave, award entitlements and withholding across the whole period.
There is also the extended superannuation definition to consider, which can create a superannuation 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.
Under Single Touch Payroll, the year end declaration to the Australian Taxation Office is what makes employees' income statements ready for their tax returns.
This needs doing for every employee who was paid during the year, including those who have since left.
Before finalising, do a last review of year to date figures per employee, because finalisation is a declaration that the information is correct and amending afterwards is possible but more work.
And tell your employees when it is done. Most people do not know that their income statement becomes available through this process rather than as a document from you, and a short note prevents a predictable wave of questions.
The other half of end of financial year is preparing for what changes on the first of July.
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, not the first pay date, which is a distinction that trips businesses up.
Where you pay above award minimums, check that the increase has not eroded a margin you were relying on, since the relevant test is against the award rate rather than against last year's pay.
Check whether the superannuation guarantee rate is changing and that your system will apply the correct rate from the correct date.
And confirm that any tax table changes are applied, which for cloud payroll systems generally happens centrally but is still worth verifying rather than assuming.
The turn of the year is a practical moment to correct records that have drifted.
Check that classifications still match what people actually do. Duties change gradually, and a classification correct at hire may not be correct three years later.
Check that employment basis is recorded correctly, particularly where someone has moved between full time, part time and casual arrangements.
Check that personal details, addresses and bank details are current, since self service makes this easy for employees to maintain if they are reminded.
And confirm that any annualised salary arrangements have had their required reconciliation performed, because that reconciliation is the entire basis on which the arrangement stands.
Fair Work requires payroll records to be kept for seven years, in a legible form, and not false or misleading.
The practical checks are that records exist for the whole year, that they cover what is required including hours where relevant to the entitlement, and that payslips were issued within one working day of payment with the prescribed content.
Where a system change happened during the year, confirm that records from the previous system remain accessible. This is a common gap, because attention goes to migrating what the new system needs rather than to retaining what the old one held.
The reason this matters is evidential. Where records cannot be produced, an employee's claim about their hours or pay can be presumed correct unless the employer disproves it.
The step almost everyone skips and the one that makes next year 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.
Across businesses, the same causes appear each year.
Allowance categorisation is the most frequent, because each allowance is decided once and rarely revisited.
Superannuation on the wrong earnings base is the most expensive, because it compounds quarterly and silently.
Failed Single Touch Payroll submissions that were never resubmitted are the most easily missed, because nothing visible goes wrong at the time.
Leave accrual for variable hours employees is the most technically awkward and produces errors that persist for years.
And terminations handled hurriedly are the most likely to be individually significant, because several rules apply at once and the person has usually left before anybody checks.
End of financial year is a test of the year's configuration rather than a task in its own right, which is why the businesses with the least difficulty are those whose configuration was correct throughout.
Our guide to Australian payroll compliance covers the underlying obligations in detail, and where the year end review surfaces something that needs specialist attention, addressing it deliberately is considerably better than carrying it into another year.
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 what the function needs across the rest of the year.
If you would like help working through your year end position, get in touch.
