Year End STP Finalisation

Process Manual

Abstract
Simple guide on how to follow Year End STP Finalisation Process
V1.0 2020
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Table of Contents

What is it? ................................................................................................................................................... 2

What reports to produce? .......................................................................................................................... 2
Payment Summary Details ........................................................................................................................ 2
Payroll Activity Summary Report ............................................................................................................... 2
Report figures in year-end workpapers .................................................................................................... 3
A few things to check ................................................................................................................................ 3
Submit for review ....................................................................................................................................... 3
Xero Payment Summaries/ STP Finalisation ............................................................................................ 4
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Year End STP Finalisation Process

What is it?

STP is the new legislation required by the ATO of employers to report their wages each pay run. Note, submission of
these reports to the ATO MUST be done by 14 July.

Although they report their information each pay run, they must also perform a “finalisation” at year end to confirm with
the ATO these figures are true and correct, and no adjustments have been made. This part of the process was formally
known as “Payment Summaries”.

In order to process STP finalisation correctly, we must run a few year-end reports to check all balances align and there
are no discrepancies. Where applicable, information should also be updated in draft end of year workpapers.

No finalisations should be submitted until the below has been performed and all discrepancies solved. It is important to
read all parts before you begin to reconcile amounts as some accounts are made up of multiple columns/figures within
the reports you are reviewing.

What reports to produce?

Run the following reports from the “Payroll” section of reports centre in Xero and compare with the applicable accounts
on the Profit & Loss and Balance Sheet:

1. Payment Summary Details

 Report is to be saved as PDF and uploaded into client 2020 Docman folder
 Most amounts in this report should be recognisable by now. However, it is important to note that this
report does show exactly what is to be reported on the employees Income Statements.
 Amounts in this report should align as follows:
o Gross Payment = along with a few other columns that may contain figures in this report (explained
below), this should form part of the total earnings and total wage figures
o RFBA = This is any fringe benefits the employee has received during the year
 Given we mainly deal with SBE’s, this figure would be quite rare to come across
o RESC = This is any amounts of superannuation paid via salary sacrifice that is above the standard
9.5%
 This amount can be taken up in different ways by the client, may be in super or wage expense.
 Note – this amount will not be the total amount of super expense account for the year
o Lump Sum Items = Include any lump sums paid out during the year due to termination and/or
redundancy.
 These amounts usually form part of total wage expense account
o Allowances = Include any lump sums paid out during the year due to termination and/or
redundancy.
 These amounts usually form part of total wage expense account but aren’t always reflected as
W1 on activity statement report
o Tax Withheld = total PAYG withholding (less ATO payments) for the year as per balance sheet.
You will need to click into this account to confirm amount raised for the full year
o Workplace giving = depending on how this has been set up, but this may be reflected within wage
accounts or in other accounts within client file – you must locate and confirm correct treatment
and/or balance
o Union Fees = as per workplace giving

2. Payroll Activity Summary Report

 Given you have reconciled the above figures and aligned any discrepancies, the amounts on this
report should match the following:
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o Total W1 = total wage expense for the year as per profit & loss. If there is a discrepancy, keep
reconciling all amounts in case the discrepancy is caused by one of the following figures.
o Total W2 = total tax withheld as per payment summary details report
o Super = total super should match super expense account (P&L) along with super payable account
for the full year. With the super payable (liability) account, treat as per PAYGW; you will need to
drill into this account to confirm liability raised for the year.
o Deductions = total workplace giving & union fees
o Reimbursements = this can be handled a few different ways depending on set up. Note, this is a
full repayment of expense incurred by employee on behalf of the business.
 Taken up in P&L – if this is the case, we need to confirm any GST relating to the expense is
taken up
 Taken up via balance sheet clearing account – we must ensure this account is NIL at year end
and relating expenses have been taken up in P&L (less any GST that may be applicable)
o Net Pay = Wages Payable account, again, you need to confirm liability raised for the full year.
 This account should be NIL at 30 June or be a timing issue with last pay run of the year (e.g.
clearing within first couple of days of new financial year).
o Total Pay = net pay plus reimbursements

Report figures in year-end workpapers

By this stage of the year, there should be a draft year end workpaper saved into the clients Docman folder. Now is a
good time to update workpapers with payroll figures.
A few things to check:
1. Ensure the Clients Name, Year End Date and Software is filled out on the first Tab – Workpapers Checklist
2. Ensure BAS Reconciliation Tab is filled out, year to date. A long with the following:
 Ensure ABN, CASH or ACCRUALS are entered into the BAS Reconciliation
 Enter the aligning figures that need to go into W1 & W2 on the June BAS if it is not already completed.
This ensures what we are lodging in Payment Summaries/ STP Finalisation, matches the BAS’s
lodged.
3. Ensure wages figures are recorded in wages reconciliation workpaper. You may have to override some
formulas in this workpaper remembering we aren’t required to do the PAYG Payment Summaries tab as we
have these directly from the software.
 Tip – don’t include cents as this isn’t reported to the ATO via BAS, payment summaries or tax return
 Once you have entered all information in this workpaper, you must ensure that there are no
discrepancies in the reconciliation section of this workpaper
4. Super Payable Reconciliation can also be updated at this stage ensuring you not only record the liability per
quarter, you also enter in the payment information (date and amounts) in the appropriate column.
 Super payments are due on the 28th of the month following the quarter end. Any date after this,
should be recorded in the late column (date and amount)

It is important to ensure you save the appropriate reports (not including profit & loss and balance sheet as other
figures on these reports are likely to change)

Submit for Review

Until confidence is built within the team on how to process this task, please submit the following reports (for the full
financial year) for review via uploading to job on Monday.com and informing manager it is ready for review:
- Profit & Loss
- Balance Sheet
- Payment Summary Details
- Payroll Activity Summary

If any review points come out of this, it is crucial that you ensure you update any reports saved into Docman (and
removing previously saved reports) and update the workpapers with adjusted figures.
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Xero Payment Summaries/ STP Finalisation

Given STP is now pretty much adopted by all employers, it is unlikely you will produce “payment summaries”. Note,
exception being closely held employers who have an extension to enrol.

The new process is called “STP Finalisation” and requires an alignment of amounts previously lodged with the ATO
and your reconciled amounts (from above steps). This process confirms to the ATO the final wage figures applicable
to each employee and therefore what to expect to see in the employees’ individual tax return.
As part of the new “STP” legislation, it is no longer a requirement to provide a copy of the end of year reports to
employees. Employees can access these reports via their accountant or by logging into their MyGov account.

Once review has been completed and you are given the go ahead to submit with the ATO, the following needs to be
done:
1. Payroll
2. Pay Employees
3. Confirm all pay runs for the year (in particular the last one for the year) have been filed (you should see a
“FILED” in Green beside the pay run list.
 If there is NO green FILED icon, STP may still not be set up.
4. Once confirmed, go back to the payroll tab and select the Single Touch Payroll option
 Note, this can also be accessed via Payroll – Employees – End Of Year Reports (option to the right)
5. From here, ensure nothing is coming up under the “for attention” section other than the year end finalisation.
If this is the only option, select “Go to finalisation”
6. Click through each employee and ensure it matches against the Payroll Employee Summary Report you
reviewed earlier
7. To finalise - Click all employees by selecting box in the top left (next to “Employees”) – select “Finalise and
submit to ATO”
8. Ensure this lodges successfully – once it does, you are done
 Make note in Year End Workpapers – Wage Reconciliation “Lodged via STP Finalisation on [insert
lodgement date] [insert your initials]”.
 E.G. “Lodged via STP Finalisation on 14 July 2020 HB”