The End of the Financial Year (EOFY) can feel like a bit of a hurdle for small businesses, but payroll preparation doesn’t have to be a headache.
This comprehensive guide equips you with the knowledge and resources to navigate the EOFY payroll with confidence. We’ll cover everything you need to know, from verifying employee details and finalising super contributions to preparing payment summaries and securing crucial documentation.
Read on to ensure a smooth and successful EOFY payroll experience with Payroller!
Why is payroll important for EOFY?
EOFY is a time for taking stock of your entire financial year. Accurate payroll records are like building blocks โ they form the foundation for a reliable picture of your business’s financial health. Errors in payroll can lead to inaccurate tax calculations, superannuation shortfalls, and, ultimately, trouble with the Australian Taxation Office (ATO).
Accurate payroll data is critical for tax compliance and reporting on Pay and You Go (PAYG) deducted from your employeesโ salary all year round. They also include payment summaries which are used by your employees to lodge their own tax returns.
What should small businesses know about payroll at the end of the financial year?
The ATO pushed out a few payroll updates throughout the 2024/25 financial year. Hereโs a breakdown of key things Australian businesses should know:
Superannuation Guarantee (SG) increase
As of 1 July 2024, the Superannuation Guarantee (SG) rate increased to 11.5% of an employeeโs Ordinary Time Earnings (OTE). The SG rate is set to eventually rise again to 12% on 1 July 2025, as part of a long-term plan to enhance retirement savings.
PAYG withholding update
The Australian Taxation Office (ATO) reviews PAYG withholding cycles annually. For 2025, businesses may see changes in their withholding, reporting, and payment cycles based on their annual withholding amount. If your businessโs annual withholding exceeds certain thresholds, your reporting and payment obligations may change from 1 July 2025.
Learn more from the ATO website.
Minimum wage increase
As of the latest update, the national minimum wage in Australia for 2025 is $24.10 per hour or $915.9 per week (38 hours) before tax. Minimum wages can vary slightly across different regions and industries, so ensure you are compliant with the specific rates applicable to your business.
How to prepare your payroll for the end of the financial year
The next financial year is right around the corner! Are your payroll processes prepared for the EOFY? Below is a complete guide to nailing your payroll to make the EOFY easier.
1. Verify employee details
Accurate employee details are vital for generating correct payment summaries, ensuring proper tax is withheld, and avoiding ATO audits. Ensure that all employee information, including Tax File Number (TFN), address, and bank details, is up to date. To help, consider establishing a clear deadline for employees to review and confirm their details.
Remember to store employee data securely, with limited access and follow data privacy best practices. If you use cloud accounting software, your provider should offer extensive protection against data corruption and privacy.
2. Review leave balances
Your tracked leave balances should match calculated pay entitlements when employees take annual, sick, or personal leave. Discrepancies can lead to disputes and potential delays in processing leave requests or final pay at EOFY.
Clear and up-to-date leave records ensure employees understand their remaining leave entitlements and can plan accordingly. This fosters trust and transparency throughout the financial year and beyond.
3. Confirm salaries and wages
Your employeesโ payment summaries are based on accurate salary and wage information in your payroll system. Cross-verify the total salaries and wages paid to your staff throughout the year, and handle any errors you spot as soon as possible. Confirm your info with contracts, communications about salary and wages, and payroll reports.
It’s good practice to conduct regular reviews of salaries and wages throughout the year, not just at EOFY. This helps identify and address any discrepancies promptly. If itโs near EOFY, schedule a dedicated time for confirmation a few weeks before.
4. Finalise STP
Single Touch Payroll (STP) finalisation is the process of notifying the ATO that you’ve finished reporting all employee income and super contributions for the entire financial year. For a smooth EOFY, finalise STP for employees by 14 July following the financial year.
Use your ATO-approved payroll software to finalise your STP reporting. Remember to review each employee’s STP information before submitting the declaration. For employees who have left the business during the year, finalise their STP as soon as they cease employment.
5. Check super contributions
Throughout the year, your payroll records should have complete details of SG contributions made to each employeeโs nominated super fund. That includes details on the contribution amount, date, and the employeeโs super fund details. While contributions can be made throughout the quarter, remember there are specific quarterly deadlines set by the ATO for employers to make super guarantee payments.
Always keep copies of documents tracking super contributions for future reference. If you’re unsure about verifying super contributions, contact the super fund or a registered tax agent. They can provide specific guidance based on your situation.
6. Prepare payment summaries
Employers are required by law to prepare and distribute payment summaries to all their employees who were paid during the financial year. Payment summaries detail an employee’s income earned throughout the year, including:
- Gross wages and salaries
- Allowances paid (if applicable)
- Tax withheld (PAYG withholding)
- Reportable fringe benefits (if applicable)
- SG contributions made by the employer
Payroll software like Payroller can help you automatically generate payment summaries based on your payroll data. If youโre registered for STP, your employees can access their income statements (equivalent to a payment summary) through their MyGov account.
7. Finalise employee tax deductions
Throughout the year, your employees are responsible for claiming any eligible deductions they are entitled to, like work-related expenses, union fees, or self-education expenses. Receipts and other documentation to support their claims should be factored into an employeeโs final net pay for the year. Ensure that these records match up.
While employees are ultimately responsible for claiming the correct deductions, as an employer, you play a crucial role in collecting the necessary information.
8. Update payroll software
Payroll software updates typically include changes to reflect the latest tax rates, SG rates, and other legislative changes that come into effect on July 1st of each year. By using the latest version of the software, you can also enjoy new features that streamline your payroll reporting for EOFY and payroll processing for the next financial year.
If youโre having trouble updating your software, most providers offer support resources or user guides to assist with the update process. Payroller users are always on the software release by using the web app or the mobile app store.
9. Secure documentation
You should always have copies of documentation related to your payroll throughout the financial year. Many businesses still store physical copies in secured locations, but digital record-keeping is a more popular and cost-effective solution through cloud software.
The ATO requires employers to keep payroll records for at least seven years after the income year they relate to. Develop a clear record-keeping policy outlining what documents to retain, storage protocols, and disposal guidelines (after the retention period).
Tips for payroll processing for the next financial year
Here are some helpful tips for payroll processing in the coming financial year.
- Embrace technology with robust payroll software
Using payroll software can streamline processes, minimise errors, and automate many tasks associated with payroll, saving you time and effort. Look for AI payroll features related to STP reporting, leave tracking, and integration with accounting software. - Invest in positive employee experience
Offering a seamless and user-friendly payroll experience for employees, including easy access to payslips and leave information, is becoming increasingly important. Payroll software providers like Payroller come with an employee-facing app to help foster transparency and trust. - Apply cybersecurity best practices
As payroll data is sensitive, prioritising cybersecurity measures to protect employee information and prevent data breaches is crucial. - Stay informed with the ATO
Keep yourself updated on any legislative changes to tax regulations, SG rates, or minimum wage determinations. These changes can occur later in the year, and they may impact how you do your payroll.
Perfect your EOFY payroll with ATO-approved software
While navigating payroll for the end of the financial year requires careful planning and attention to detail, embracing the right tools and strategies can make a significant difference. Payroller offers a comprehensive suite of features designed to simplify and automate many of the tasks discussed throughout this guide:
- Managing employee details
- Reviewing leave balances
- Easy STP reporting and finalisation
- Generating payment summaries
- โฆ and more!
Don’t let end of financial year payroll become a source of stress. Consider exploring how Payroller can transform your payroll experience and empower you through the EOFY with confidence.
