Once a year, and it matters
Finalising STP in Xero, and what happens if you do not
Finalising is the step that tells the ATO your payroll year is done and your staff can lodge. Miss it and their tax returns sit there showing figures that are not ready, and they will ring you about it. Here is the whole thing, and the checks worth doing before you press it.
What finalising actually does
Through the year, every pay run you file tells the ATO what you paid and withheld. Finalisation is a separate declaration at the end of it that says: that is the lot, these figures are complete.
Until you make it, your employees see their income statement marked as not tax ready. Most will not lodge against it, and the ones who do may have to amend later. So the practical effect of forgetting is a run of phone calls from your own staff in July asking why they cannot do their tax.
The deadline depends on who is on your payroll
For most employers it is 14 July. Where you have closely held payees, which usually means family members or owners drawing wages, later dates can apply, and which one depends on the mix and the number of employees.
In a trade company where the owner and often the spouse are on the books alongside a few staff, you are very likely in the mixed case. That is exactly the situation the general guidance handles least well, so it is worth confirming rather than assuming the 14 July date applies to you.
Before you finalise, check these four
Finalising a set of numbers that are wrong is worse than finalising late, because the wrong figures land in your employees’ tax returns. Twenty minutes here saves a mess.
Does payroll agree with your accounts?
Total wages in your payroll reports should match wages in your profit and loss, and PAYG withheld should match what you reported on your activity statements. If those do not line up, finalising just locks in the discrepancy.
Have all the pay runs actually been filed?
A pay run that was posted but never filed to the ATO is invisible to them. Check the filing status of every pay run for the year, not just the last one.
Watch out: a pay run more than 350 days old will be rejected if you try to file it now. There is a way through that, but it involves choices with consequences, so do not improvise it.
Are allowances set up as allowances?
Tool, site, travel and similar allowances have to be reported as allowances, not buried in gross wages and not set up as reimbursements. Getting this wrong changes what your employee sees and can change their deduction.
Watch out: if an allowance was set up as a reimbursement, it is invisible to allowance reporting and it probably did not attract super either. That is two problems, and this is the time of year you find them.
Anyone with reportable fringe benefits?
If an employee had fringe benefits above the threshold, the grossed up amount goes on their income statement, and it is entered as part of finalisation rather than through a pay run. A work vehicle available for private use is the usual trigger in a trade business.
Finalising, step by step
Go to Payroll, then Single Touch Payroll
From the blue bar choose Payroll, then Single Touch Payroll. That screen holds your filing history and the finalisation tab.
Open the Finalisation tab and pick the year
Make sure it is the financial year you mean. Finalising the wrong year is recoverable but tedious.
Read the figures for every employee
Gross, tax withheld, super, allowances, and anyone who left during the year. Terminated employees still need finalising, and they are the ones most often missed because they are no longer front of mind.
Watch out: this is your last easy chance to catch an error. After finalisation a fix means an amendment, which is more work and more explaining.
Add reportable fringe benefits if there are any
Entered per employee on this screen, as the grossed up amount. If you are not sure whether you have any, that is a conversation worth having before you finalise rather than after.
Tick the employees and submit the declaration
Select everyone who should be finalised, tick the authorisation, and file. Xero will confirm when the ATO accepts it.
Watch out: filing and being accepted are two different things. Come back and confirm the status changed rather than assuming it went through, because a rejection sits there quietly.
Tell your staff
They will not get a payment summary any more. Their income statement in myGov becomes tax ready, and that is their signal to lodge. A one line message saves you being asked ten times.
The finalisation checklist
Work down it on screen, then print it or save it as a PDF for the year end file. Nothing is sent anywhere and nothing is stored by us. Your ticks stay in this browser so you can close the tab and come back to it.
If the ticks do not save and the print button does nothing, the list still works on paper. Print it first and fill it in by hand.
Single Touch Payroll finalisation checklist
Business Edge Advisors, Albury. Registered tax agent 20651000.
Due 14 July. If anyone on the payroll is closely held, a family member or a director on the books, that group is not due until 30 September.
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1. Reconcile the year before you touch finalisation
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2. Check how things are set up
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3. Run the finalisation
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4. After you have finalised
General information, not advice about your payroll. If something did not reconcile, ring us on 02 6041 1687 before you finalise rather than after.
Questions we get asked
I finalised and then found a mistake.
Fixable. You amend the figures and file again for that employee. Do it promptly, because if they have already lodged their return on the old numbers they will need to amend theirs too.
An employee left in November. Do I still finalise them?
Yes. Everyone you paid during the year needs finalising, including people who have long since gone.
I have not filed since about March.
More common than you would think, and worth ringing about rather than trying to catch up quietly, because the order you do things in matters and old pay runs have their own trap.
My wife is on the books. Does that change the date?
It might. Family members drawing wages can be closely held payees, which can shift the deadline. It depends on your mix, so it is worth confirming rather than assuming either way.
Do I still give out payment summaries?
No. Once you are reporting through Single Touch Payroll, finalisation replaces them entirely.
Want it checked before you press finalise?
We go through payroll files at this time of year constantly. Having somebody look at the numbers before the declaration goes in is a short job and it is a lot cheaper than an amendment.
Level 1, 561 Olive Street, Albury NSW 2640. Registered Tax Agent 20651000.
General information rather than advice about your payroll. Finalisation deadlines depend on whether you have closely held payees and how many employees you have, and the treatment of allowances and reportable fringe benefits depends on your own arrangements. Screens described here are the current Xero layout and Xero changes them from time to time.