Reconcile Employee Earnings

How do I reconcile Single Touch Payroll (STP) for end of year

Reconciling employee earnings reported via Single Touch Payroll (STP) with employee earnings processed in finalised pay runs is a crucial part of wrapping your End of Financial Year (EOFY). You can complete the reconciliation using a Finalisation Event; however, we recommend that you create an Update Event as it will make sure that:

• We will include any employees who you previously terminated and you can add the Reportable Fringe Benefits (RFB) amounts for them if required

• If there are changes made to pay category or deduction category settings, you can lodge the update event to refresh the data for previously terminated employees.

For businesses with more than 2,000 employees and more than one default pay schedule, i.e., the pay schedule assigned to an employee via their Pay Run Defaults page, you will need to create and lodge a finalisation event for each schedule and reconcile each event/pay schedule separately. Once the variance is $0, we recommend lodging the Update Event to confirm the full Year to Date (YTD) data is correct before proceeding with the finalisation event.

Where do I start?

Download the STP Excel report

You can download the STP Excel report directly from the update event. Click the Download button from within the event to choose between two reporting options:

• Excel

Contains information for only the employees included in the update event. The totals in this report will match the totals that appear at the bottom of each column in the user interface for the finalisation event.

• Excel (YTD)

Use this report to reconcile what will be reported via STP for the financial year against the payments processed in your finalised pay runs. The Year to Date (YTD) report lists all employees included in a successfully lodged STP event for the specified pay schedule used to create the finalisation event — including any employees you previously marked as final during the financial year who are no longer appearing in the finalisation event. Those employees will also be listed in the finalisation event wizard.

Reconciling using the Excel (YTD) report

Understanding the worksheets

Upon opening the Excel (YTD) report, you will notice four worksheets:

• STP year to date

Contains all payroll earnings reported via STP for the financial year, for all employees attached to the selected pay schedule.

• Itemised gross

Contains the same STP earnings as above, but broken down by individual payment classifications.

• ETP

Contains all Employment Termination Payment (ETP) earnings reported via STP for the financial year, for all employees attached to the selected pay schedule.

• Payroll YTD

Contains all payroll earnings processed in your finalised pay runs for employees whose primary pay schedule matches the one selected when creating the event. For example, if you created an event for the Monthly pay schedule, all employees with Monthly as their default pay schedule will appear here — including any earnings processed in ad hoc pay runs during the financial year.

This worksheet also includes closely held employees reported on a quarterly basis. Although they are reported separately to non-closely held employees, they must still be reported via STP.

• Variance

Compares the total YTD taxable earnings between the STP YTD and Payroll YTD worksheets — in other words, what you reported via STP versus what you processed in your pay runs.

• • If the variance is $0, all figures match and you can proceed with lodging your finalisation event.

  • If the variance is greater than a few dollars (allowing for rounding), you will need to investigate and resolve the discrepancy before proceeding.

Investigating a positive variance

A positive variance occurs when the figures in the STP YTD tab are higher than the figures in the Payroll YTD tab. Which of the below reasons does your variance relate to?

• Incorrect classification of Pre-Tax Deductions

If the STP YTD tab includes an amount other than zero in the Pre-Tax Deductions (Not classified) column, this is due to the classification settings for your pre-tax deduction categories. STP2 requires salary sacrifice amounts to be itemised, so you should review all pre-tax deduction categories that reduce taxable earnings and map them to either:

• • Salary sacrifice (superannuation); or

  • Salary sacrifice (other employee benefits).

Once updated, refresh the data in your STP Event (or create a new event) to confirm the variance has been cleared.

• Pay category payment classification

If you have PAYG-exempt pay categories where the payment should not form part of an employee's wages/salary, review the payment classification of those pay categories. Any category with a classification of Default will be reported as ordinary earnings via STP.

Export your pay categories to a spreadsheet or review them within the platform, then update the Classification field to reflect the correct option for each payment type. Once updated, refresh the data in your STP Event (or create a new event) to confirm the variance has been cleared. 

• Duplicated/overlapping data from an Employing Entity change

In the STP YTD tab, some employees may show two STP records. This is expected for employees who worked across multiple Employing Entities during the year. However, if the combined amounts are overstated compared to the Payroll YTD amounts, the Employing Entity change was not completed correctly.

Investigating a negative variance

A negative variance occurs when the figures in the STP YTD tab are lower than the figures in the Payroll YTD tab. Which of the below reasons does your variance relate to?

• Closely Held Employees

If you have employees classified as Closely Held Payees reporting on a quarterly basis, confirm that all of their lodgements have been submitted through STP. Compare the earnings between the Payroll YTD and STP YTD worksheets to verify this is the cause.

• Failed or partially successful pay events

Review your STP lodgement list by navigating to Reports > Single Touch Payroll. If any lodgements show a status of Failed or Partially Successful, some earnings data was not submitted successfully to the ATO. Create an Update Event to refresh the YTD amounts with the ATO.

Once the update event is lodged, return to the finalisation event, refresh the data, and download an updated Excel (YTD) report to confirm the variance has been resolved before proceeding.

Still have a variance after checking all causes?

If none of the above causes apply, we recommend comparing each employee's earnings between the STP YTD and Payroll YTD worksheets line by line. This will help identify the specific employee(s) where the discrepancy originates so you can investigate further.

Once you have identified the affected employees, contact our support team for further assistance if required.

Variances due to Salary Sacrifice amounts

If the difference between the Total Reportable Gross in your STP reports and the Gross Payments amount downloaded from the ATO portal is due to Salary Sacrifice amounts being deducted from employee wages, the information below will help explain why this occurs.

As part of STP Phase 2 reporting requirements, submitted STP pay events must include the total pre-sacrificed gross payments made to employees, and separately report the Salary Sacrifice/pre-tax deduction amounts. The ATO uses these figures to calculate the employer (payer) totals, which are then populated into your ATO portal and used for W1/W2 prefilling of your activity statements. As a result, the two "Gross" figures are calculated differently — which is expected and correct.

The sections below outline what the ATO includes in the employer (payer) totals, using information from the ATO website.

STP Phase 2 change to salary sacrifice reporting

The screenshot below, sourced from the ATO website, details the change in reporting requirements introduced as part of STP Phase 2. Under STP Phase 2, employers are required to report pre-sacrificed gross amounts and separately itemise salary sacrifice amounts — rather than reporting only the post-sacrificed amount as was the case under STP Phase 1.

This means the Total Reportable Gross figures in your STP reports correctly include the Salary Sacrifice (SS) amounts, as this is what must be reported to the ATO via STP.