Your Employee Payment Summaries are required to be delivered to your employees by the 14th July 2018.
Before you produce the Payment Summaries it is recommended that an end of year check is done to make sure everything reconciles. It is much easier to correct any variances before the Payment Summaries are complete.
The items that should be checked are as follows:
- Check that all pays have been processed. A common question that arises for end of year is regarding the final pay for the year. The period that pays are included is governed by the date they were paid. So if your week or pay period ended on 28 June but wasn’t paid until 2nd July for example then the payment and pay details would be included in the next years amounts as it was paid after 30 June.
- Check that the amounts paid as net pay, agree with the expected net amounts from the software or calculations for payroll. e.g In Xero and some other software the net wages are allocated to a Wages payable account when the wages are processed. The net wages when they are processed from your bank account should also be allocated to this wages payable account so that they contra out the amount generated. At the end of the period the balance of the wages payable account should be nil if all of the net wages have been paid correctly. If the actual net wages paid do not agree with the expected net wages amount you need to review this and find out why. Otherwise your payment summaries may not reflect the actual wages paid to an employee for the year.
- Print and review reports. You should print a wages summary report for the year ended 30 June which shows the Gross wages, Tax Withheld and Superannuation amounts. You should then check your software ledger accounts for Gross wages expense, PAYG withheld and superannuation accrued to make sure these amounts agree with the payroll report.
- Check that you have been paying the correct superannuation amounts. Most software that process payroll will allocate the superannuation payable to a separate account. When the superannuation is paid it should also be allocated to this account and you should be able to reconcile what the balance represents. e.g At the end of June you should have at least paid all superannuation for your employees up to the end of March as this was due to be paid by 28th April. Superannuation for the June quarter is due 28th July.
- Additional Superannuation paid for employees. If you have paid salary sacrifice or additional superannuation for your employees above the Superannuation Guarantee obligations of 9.5% remember that this will need to be shown on the payment summary. Your payroll software should have a facility to process this so it appears on the software generated payment summaries.
- Run a payment summary report and review each employee. This will check for incorrect allocations when processing the payroll. Attend to any adjustments that need to be made as it is much easier to adjust before the payment summary is issued rather than having to amend it and produce an amended payment summary.
- Make sure you submit your PAYG Payment Summary Annual Report. For most businesses this is due to be lodged with the Australian Tax Office by 14th August.
By doing these few checks it can save you discovering a discrepancy which may not be picked up until your accounts and tax for the year are processed. If an amendment to a payment summary is required you would need to issue the amended summary and also lodge an amended annual Payment summary Report to the Tax Office. This can become difficult especially if the employee has lodged their own personal tax return using the incorrect payment summary. In most cases these checks will not take long but can save you from the stress of finding out later on an having to go through the amendment process.
This article appeared in our July 2018 newsletter and was written by Patricia Glenn.