As the end of the financial year 2023 rapidly approaches, it’s essential for business owners to gear up for the upcoming transition. Numerous factors must be taken into account before the year concludes, and making wise choices is key to establishing a robust financial base. This blog post delves into top tips and best practices that will guide you towards closing the financial year on a positive note.
1. Check your employees’ records
As the end of the financial year nears, it’s crucial to ensure that your employees’ records are accurate and current. This involves confirming personal details such as names, addresses, and contact information, as well as examining payroll data for any inconsistencies. Make sure tax withholding amounts, superannuation contributions, and leave balances are correctly calculated and documented. Moreover, maintaining precise records simplifies the process of generating year-end financial statements and tax documents, saving time and effort.
2. Review pay items and their settings
Reviewing pay items and their settings is an essential step as the financial year comes to a close. This process involves examining the various components of your employees’ compensation packages, such as wages, bonuses, commissions, allowances, and deductions, to ensure they are correctly set up in your payroll system. By thoroughly examining pay items and their settings, you ensure adherence to applicable laws and regulations, minimise the likelihood of payroll mistakes, and offer your employees precise and prompt compensation, promoting a supportive work atmosphere.
3. Post and file any pay runs for the 2022/23 financial year
It’s crucial to post and file all pay runs pertaining to the 2022/23 financial year in a timely manner. By doing so, you ensure accurate record-keeping and compliance with relevant regulations. All pay runs with a payment date falling within this financial year must be posted and filed prior to finalising your employees. Keep in mind that if these pay runs are to be reported in FY23, the payment date should be on or before June 30, 2023.
4. Process any outstanding superannuation payments
Addressing any outstanding superannuation payments is an important aspect of year-end financial preparations. By promptly processing these payments, you fulfil your employer obligations and safeguard your employees’ retirement savings. To be eligible for a deduction on superannuation accruals submitted through auto super for the current financial year, ensure that super batches are approved by 2:00 pm AEST on June 14, 2023. Remember to note this deadline in your calendar to avoid missing the opportunity to claim the deduction.
5. Reconcile your payroll accounts
Reconciling your payroll accounts is a crucial step in maintaining financial accuracy and ensuring compliance with applicable regulations. This process involves comparing your payroll records with bank statements, tax documents, and other relevant financial data to identify and resolve any discrepancies or errors. By consistently reconciling payroll accounts, you can proficiently handle your company’s finances, defend against possible complications, and nurture a systematically arranged and transparent work setting.
6. Next, review the Payroll Activity Summary report against the Payment Summary Details report
Stay with us – you’re almost there. It’s crucial to understand that the Payroll Activity Summary report displays gross earnings, while the Payment Summary Details report presents taxable earnings. For any salary sacrifice or pre-tax deductions processed during the financial year, deduct them from the gross wages displayed in the Payroll Activity Summary report. The resulting total should align with the Payment Summary Details Report (keep in mind that this report only shows truncated values, excluding cents).
7. Don’t forget to identify and amend any mistakes
Any mistakes made during the financial year can be rectified using an unscheduled pay run. Just set up the pay run for the necessary period and input the adjustment amounts, including negative values if required. Make sure the payment date of the unscheduled pay run falls within the appropriate financial year (for instance, on or before June 30, 2023) to guarantee accurate reporting.
8. Process STP finalisation
The process of STP finalisation is a crucial step in ensuring accurate and compliant reporting for your business’s payroll. This procedure involves completing all necessary pay runs for the financial year, reviewing and verifying employee payment information, and submitting the finalised Single Touch Payroll (STP) data to the relevant tax authorities. By diligently carrying out STP finalisation, you can maintain proper financial records, avoid penalties, and ensure a smooth transition into the next financial year.
That’s it – everything is sorted!
Now you can rest easy, knowing that your payroll year-end has been successfully executed. Moving forward to FY24, pay runs with a payment date on or after July 1, 2023, will be processed in the upcoming financial year, and any updated tax rates will be implemented automatically.
The Super Guarantee (SG) rate will also rise from 10.5 percent to 11 percent on July 1, 2023, for the 2023/24 fiscal year. Pay runs with a payment date of July 1, 2023, or later will have the new rate automatically applied to employees’ payslips, provided their superannuation line has been established with a Rate Type of Statutory Rate.
If you need any assistance with the upcoming EOFY please let us know and we would be glad to help with all your accounting and taxation needs at SMG!