Tips For Processing Payroll Perfectly

In preparation for lodging your wages to the ATO with Single Touch Payroll (STP) and the BAS, below are some tips to help you process payroll perfectly in Xero.

Tips & best practices for STP

Process the payroll, or prepare a draft payrun, before paying employees. Then pay your employees the Net Pay as advised by Xero. This will help to ensure that the wages that you pay your employees match the wages that are processed and reported to the ATO.

However, please note that if you are paying reimbursements to your employees, do NOT rely on the net pay shown above. You must go into the employee’s payrun and scroll down to the Total Payment for Employee. The amount shown in the Total Payment is the amount that you should pay your employee. However, rest assured that the reimbursement amount will not be reported to the ATO as part of wages.

 If the wages that Xero advises you to pay are different to what you expected to pay, please seek assistance from an accountant of bookkeeper.

Tips & best practices for reporting wages on the BAS

Before preparing the BAS, it is recommended that you check the “804 Wages Payable – Payrol”’ account to ensure that the wages paid match the wages processed. If you are following the above instruction for STP, then it is likely that the wages in the 804 account will match beautifully. However, if for whatever reason the wages in the 804 account do not match as explained below, then the discrepancies should be fixed before the BAS is prepared.

One way to check the 804 account is to use the Account Transactions report.

Then select the 804 account and set the date range.

The Debit column will show payments to your employees that have been reconciled to the 804 account (note that all wage payments should be reconciled to the 804 account instead of the 477 account).  The credit column will show the net wage processed through payroll. These columns should equal each other so that the ending balance is nil. This is necessary to confirm that wages paid to employees match what will be lodged to the ATO.

If these columns do not equal each other and you are unsure how to fix it, please contact your accountant or bookkeeper for assistance.