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Four steps to a seamless payroll year end with Xero Payroll
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As the summer days become a memory, it signals the onset of a crucial period for payroll professionals in New Zealand. With the approaching new tax year on 1 April 2024, regulatory changes are set to impact payroll calculations across the country. Staying informed and getting prepared is essential.
In this article, we delve into these updates and provide four steps to help navigate the upcoming year-end period seamlessly, with Xero Payroll. Whether you’re a seasoned payroll manager or new to this all, arming yourself with this knowledge will be instrumental to maintaining accuracy and efficiency within your payroll operations.
Important upcoming changes for New Zealand payroll compliance
There are four key changes in New Zealand payroll calculations coming up for the new tax year:
- Adult minimum wage will increase to $23.15 per hour from 1 April, 2024
- The annual ACC earner levy rate is increasing from 1.53 percent to 1.60 percent
- The annual ACC earner levy threshold is increasing to $142,283
- The student loan threshold is increasing to $464 per week. See table below:
If you are paid… | Your student loan repayment threshold is… |
---|---|
Weekly | $464 |
Fortnightly | $928 |
Half-Monthly | $1,005.33 |
Four-weekly | $1,856 |
Monthly | $2,010.67 |
In Xero Payroll, the above rates are automatically applied to any pay runs with a payment date on or after 1 April. Your employees may see slight variations in their payslip.
With this in mind, below are some steps to get you smoothly through the year end period.
Step one: Post the last pay run
Make sure all your pay runs for the financial year have been posted. If you’re using payday filing through Xero, you’ll also need to make sure these have been filed. To make sure these pay runs are reported in the 2023 – 24 financial year, the payment date will need to fall on or before 31 March 2024.
Step two: Review and reconcile
Go to payroll settings to review all the information that impacts your payroll reporting. If anything is incorrect, you can update this before processing your first pay run for the new financial year. You can also take this opportunity to check that any final employee payments and changes have been put through.
You’re likely already regularly reconciling posted pay runs, but it’s always a great idea to run your eyes down reports like pay history and leave transaction reports to make sure there are no surprises. Here are some tips that may help:
- If multiple expense accounts have been used for earnings and KiwiSaver, make sure the totals are added together and compared against the pay history report.
- Check for any transactions incorrectly reconciled against your expense accounts. You can check this by running the Account Transactions report in Xero.
- If your totals don’t look correct, this could be due to some manual journals. Check the amounts by running the Journal report in Xero, and then click manual journals.
- If you’re having trouble locating the source of a discrepancy, run your reports for a smaller date range (like monthly) or by each pay period.
Step three: Make any amendments
Any errors made throughout the financial year (such as missed or incorrectly posted pay runs) can be corrected using an unscheduled pay run.
Simply create the pay run for the required period, and enter the adjustment amounts. These adjustments will be filed with Inland Revenue (IR). You can even enter negative values, if needed. If you do this, you will need to use myIR to manually adjust the returns for the employee. In myIR you can edit previously returned files, however, if the adjustment is for a period before the current tax period it might be worth contacting IR to discuss.
Once any amendments are made, check the payment date of the unscheduled pay run falls within the correct financial year, so it’s reported correctly.
Step four: Review and update employee details
- With the increased minimum wage, don’t forget to check and update the salary and wage details for any impacted employees.
- You should also review current leave entitlements and make any adjustments as necessary – especially if work patterns have changed recently.
- Finally, remember that you need to review and update the ESCT rate for each employee when they start working for you and at the start of each tax year. If your employee’s salary or wages change during the tax year, do not change the ESCT rate during the year. Instead, change it at the start of the next tax year.
You’re done! Sit back and relax
That’s it! There should be nothing else you need to do to finalise payroll year end. Your payroll accounts should now be in good shape for the new financial year. Any pay runs with a payment date on or after 1 April 2024 will fall within the new financial year.
In the meantime, check out Xero Central for more information on how to prepare payroll for the new financial year. Our friendly support team is also available if you need a hand.