The End of Financial Year (EOFY) is a critical period for businesses, requiring meticulous attention to detail, especially when it comes to payroll. Mistakes during this time can lead to compliance issues, financial penalties, and employee dissatisfaction. To help you navigate this challenging period, here are some common payroll mistakes to avoid during EOFY.
Missing Deadlines
One of the most significant mistakes businesses make is missing important deadlines. Superannuation payments must be made by 28 July, and the Single Touch Payroll (STP) finalisation declaration must be submitted to the ATO by 14 July. Missing these deadlines can result in hefty penalties and compliance issues.
Incorrect Employee Information
Ensuring that all employee information is up-to-date is crucial. Outdated details such as addresses, tax file numbers (TFN), and bank account information can cause payroll errors. Additionally, misclassifying employees can lead to incorrect pay rates and entitlements, which can be costly to rectify.
Inaccurate Payroll Calculations
Payroll calculations must be precise to avoid underpayments or overpayments. Common areas where mistakes occur include overtime and penalty rates, leave accruals, and deductions. Double-check all calculations to ensure accuracy.
Superannuation Shortfalls
Failing to meet the minimum superannuation guarantee (SG) contributions can lead to significant penalties. Ensure all super contributions are made on time and meet the required rates. It’s also essential to keep records of all superannuation payments.
Errors in Payment Summaries
Payment summaries must be accurate and provided to employees by the required deadline. Errors in these documents can cause confusion and delays in employees’ tax filings. Review payment summaries carefully to ensure all information is correct.
Ignoring Tax Legislation Changes
Tax rates and thresholds can change annually, and it’s vital to update your payroll systems accordingly. Ignoring these changes can result in non-compliance and potential fines. Stay informed about the latest tax laws and regulations to ensure your payroll processes are compliant.
Failing to Reconcile Payroll Accounts
Reconciling payroll accounts with bank statements is essential to identify and correct any discrepancies. Regular reconciliation helps ensure that all payroll transactions are accurately recorded and prevents errors from going unnoticed.
Overlooking Fringe Benefits Tax (FBT) Obligations
FBT liabilities must be reviewed and necessary declarations lodged. Overlooking FBT obligations can lead to non-compliance and financial penalties. Adjust payroll records for any FBT-related payments to ensure accuracy.
Not Conducting a Payroll Audit
An internal payroll audit helps ensure compliance with payroll laws and identifies areas for improvement. Regularly reviewing payroll policies and procedures can prevent errors and enhance accuracy. Make payroll audits a part of your EOFY preparation to maintain compliance.
Inadequate Data Backup
Securely archiving payroll records for the required retention period is crucial. Inadequate data backup can lead to data loss, which can be detrimental during EOFY processing. Regularly backup all payroll data to ensure business continuity and data security.
Seek Professional Advice
If in doubt or unsure about any of the above, seek the advice of a professional tax accountant or financial advisor. They can provide expert guidance tailored to your specific business needs and requirements.
By avoiding these common payroll mistakes, you can streamline your EOFY processes and ensure compliance with all relevant regulations. Remember, accuracy and timeliness are key to avoiding common pitfalls.
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With offices in Melbourne, Sydney and Brisbane, we work with businesses across Australia.
For more information, please contact us on 1300 887 458 and speak with one of our HR Consultants.
