Pay rates in two Financial Years

[FOOW]

Hi.

Which pay rate to use for my employees who work in fortnightly pay cycle (24 June – 7 July)?

My South Australian business operates a fortnightly pay cycle and all pays have been completed and processed for 2019 FY. The current pay cycle spans both financial years -24 June - 7 July (current payroll will be processed on 8th July). New pay rates apply from 1 July and Fair Work Ombudsman website states "You’ll need to apply the wage increase for your employees from the first full pay period starting on or after 1 July”.

I understand I need to install the compliance update and load new payroll tax tables before processing pay on 8 July. Am I correct that employees are paid at 2019 FY pay rates but are taxed at 2020 FY tax rates?

Payroll categories and hourly rates will be increased in keeping with award increases for the first full pay period to commence on 8 July 2019.

Can you confirm the order of my tasks for end of Payroll year are

Create payment summaries & finalise STP (if applicable)

Close a payroll year

Install compliance update

Load Payroll tax tables for the new 2020 payroll year

On 8 July process payroll ending 7 July

Update payroll pay rates

On 22 July Process first full pay period (8-21 July 2019)

Thank you for your assistance.

Christine

[bungy15]

Hi @FOOW 

The fairwork website is a bit ambiguous. But since the ATO regard that whole pay period as being income for the 19/20 FY and it is taxed as such.....I’ll be paying the new rates for the whole payrun. 

If you are finalising your EOPY through STP you don’t need to provide payment summaries. If you still want to provide them don’t lodge the empdupe.

Otherwise all good

Cheers

Tracey

[DannyTangney]

Hi @bungy15 @FOOW 

Just to add to the confusion, we've interpreted this slightly differently - we're going to pay the increase for the first full pay period starting on or after 1 July, on the interpretation that if the pay period started before 1 July, then the pay period (as opposed to the pay date) isn't fully in the new payroll year.

Not sure if that's right or not, but we can't find any definition of what they mean by a "full pay period".

Regards,
Danny

[bungy15]

Hi @DannyTangney 

I agree, the term “full pay period” as per fairwork is confusing. 

I’m basing my decision on the ATO’s definition ie anything paid after 1 July falls into the new FY regardless of pay period.

I guess this means a call to fairwork tomorrow 😀

[bungy15]

HI @DannyTangney and @FOOW 

You're right Danny. I just spoke to fairwork and they go by the start date of the pay period. So the new rates don't apply until your first payrun with the start date in July.

Cheers

Tracey

[DannyTangney]

Thanks for the confirmation @bungy15

I doubt many employees would be upset if they received the pay rise early, Tracey :-) Employers might not be quite so pleased...

Cheers,

Danny

[kathyTTM]

Christine, We have done the same thing. Paid our staff 1 July with New Tax rates, but old pay rates until we do the 1st FULL pay in the new Payroll year, as per the Fairwork guidelines. I would also add in running your reports before you finalize STP. As this cannot be done after your roll over. STP seems to do these by First name order which is very frustrating and you cannot run them all - only one a time - super annoying. We have run STP since 1 July 2018 so there were NO Payment summaries this year. I did however save a pdf of all staff EOY reports in case they needed the breakup of their amounts before their accountant/tax agent was ready. And seeing as this was the first ever year with No summaries, I knew they might ask for something. Your order is correct. I did my first payrun July 1st - then updated the wage increases July 2 ready for the next casuals payroll run. I will also be running my FT staff payroll one day early to ensure it goes through smoothly for 4th July. Good luck for the 8th for yours. Kathy

[FOOW]

Thanks for your comment Kathy. Reassuring to know I am on the right path.

I will create PAYG summaries in next few days - I did use STP for my last payroll and am hoping this does  not complicate matters.