I was asked the question recently about when to report wages. This came about as a client processed a payrun on 30/6 but the payment didn’t go through until 2/7.
So the quandary – is it reportable when the payrun is processed or when it was paid. The business owner naturally want’s it in the current financial year but the employee wants it in the next year.
The answer is simple – wages are reportable when they are paid, not when they are allocated in the books. This means you don’t need to do a payrun up to 30th if it happens to fall in the middle of the week.
So how do we deal with the issue above when it’s put through payroll on the 30th – we need to change the date on the payroll so it is either the 1st or 2nd. It’s always good practice to pay the wages the day they are actually processed so this doesn’t happen over a month/year end.
Superannuation then creates another anomaly – it’s accrued for accounting purposes when the wages are processed but it’s not deductible until actually paid. If possible always pay it before the end of the year so the deduction goes into the year it accrues but that’s not always possible. Just be aware that your accountant will need to do an adjustment in your tax return for any super not actually paid. Good news is there may be a corresponding adjustment from super not paid the previous year?
Photo credit: George Grinsted via VisualHunt / CC BY-SA