End of financial year payments to employees

There may be some confusion regarding the treatment of salary and wages accrued in the current financial year (prior to 30 June) where the actual payment is made in the following financial year (usually early July).

Where a payment is made on or after 1 July, the full amount of the payment will be included in the later year's payment summary. Withholding for the whole amount will be based on the later year's tax rates.

Example

XYZ Company pays their employees each Thursday. The final payment for the 2007-08 income year will occur on 26 June. The amount that is accrued following this date will be paid to the employees on 3 July and included in the 2008-09 payment summary. Withholding on the whole amount will be at the rates that apply for that year.

Electronic payments

When payments are made electronically, the date for payment is either the date stipulated in the electronic transaction or, if no date is stipulated, the date on which the payment is intended to be made into that bank account.

Example

XYZ Company instructs their bank to pay their employees' salary by EFT on 30 June 2008. The company specifies that the payments should be credited to the employees' bank account on 1 July. As the payment is instructed to be made on 1 July, these payments must be included in the 2008-09 payment summary and withholding on the whole amount will be at the rates that apply for that year.