This User Guide is a continuation of the User Guide: How to set up subcontractors review as part of EOFY Payroll, which provides a comprehensive overview of the different compliance requirements we aim to check as part of the EOFY contractors review. You should read the first review before commencing the Audit Procedures outlined in this User Guide.

1 Check all subcontractors are included in the relevant groups

Run the EOPY - Contractors Group Custom Report Pack

1. Go to Reporting > All Reports
2. Select the [Custom] Tab
3. Run the custom report pack: EOPY - Contractors Group Review
4. Click on Export > Excel
5. Save the report in the Client's folder > Bookkeeping > FYXXXX > Payroll > EOPY > TPAR

1.1 Run the Taxable Payments Annual Reports

1. Return to the Reporting Home page and run the Taxable Payments Annual Report for the same Financial Year
   
   è  The Taxable Payments Annual Report
   
   
   
   
2. You will need to run this report twice with two separate sets of rules:
   1. Contact Group: Subcontractors - TPAR - Accounts: All accounts
   2. Contact Group: Subcontractors - Consultants - Accounts: All accounts
3. Click on [Edit Report Rules]
   
   è  The Set up rules for your report pop-up screen opens
   
   Option 1 - Subcontractors - TPAR
   
   Option 2 - Subcontractors - Consultants
   
   
4. Export both versions of the TPAR report to csv
   

1.2 Compare contractor data in MS Excel

1. Open both csv export files in Excel
2. Select the payee's ABN column
3. Press CTRL+H on your keyboard
   
   è  The find and replace pop-up opens
   
   
   
   
4. In Find what type a space
5. Leave the Replace with field blank
6. Click on [Replace All]
   
   è  All spaces are removed from the ABN
   
   
7. With the ABN column still selected, click on [Conditional Formatting] > Highlight Cells Rules > Duplicate Values
   
   è  MS Excel conditional formatting
   
   
   
   
8. Make sure there are no duplicate contacts
   Note: merge any duplicate contacts back in Xero
9. Open the Contractors Group Review Excel export and delete the GST and Gross columns from both tabs
10. Return to the csv exports and copy the Contact Names column across each relevant Tab of the Contractors Group Review
11. You can now close off the csv exports
    
    è  The Contractor Group Review Excel modified report
    
    
    
    
12. Select both columns and click on [Conditional Formatting] > Highlight Cells Rules > Duplicate Values
13. When the duplicate values pop-up screen opens change the filter option from Duplicate to Unique
    
    
    
    
14. Any contacts highlighted on the Contact column (from the Contact Group Report) represent all those Xero contacts that have not been added to the relevant group
15. Go to Xero and add those contacts to the relevant TPAR or Consultants groups

2. Check all Subcontractors have all lodgement information

After you have added all the contacts in the relevant group, re-run the Taxable Payments Annual Report and ensure all the required contact information is included for each contractor. 

Once again, you will need to run the report twice:

1. Contact Group: Subcontractors - TPAR - Accounts: All accounts
   This report will be used for lodging the actual TPAR. You will need to make sure that no ABN or Address warnings are displayed on the report
   
   è  The Taxable Payments Annual Report showing contacts with missing ABN and addresses
   
   
   
   All of the missing details will need to be corrected to be able to lodge the Taxable Payments Annual Report with the ATO
   
2. Contact Group: Subcontractors - Consultants - Accounts: All accounts
   As this report is only used to assess contractors for other compliance requirements, you will need to ensure that any contractors listed in this report do not miss their ABN. Missing addresses are not important for this version of the report.

3. Export Subcontractor Data

3.1 Export Subcontractor Data for GST and TPAR Audit

After you cleaned up the data of the two reports, re-run both versions of the Taxable Payments Annual Report and export them to csv

1. Go to Accounting > Reports
2. Run the report: Taxable Payments Annual Report
   
   è  The Taxable Payments Annual Report
   
   
3. Make sure all Subcontractors are included in the Ready for Lodgement section, then click on [Export CSV]
4. Repeat the same steps for the other version of the Taxable Payments Annual Report
5. Open both versions of the csv reports in Excel
6. Select the payee's ABN column
7. Press CTRL+H on your keyboard
   
   è  The find and replace pop-up opens
   
   
   
   
8. In Find what type a space
9. Leave the Replace with field blank
10. Click on [Replace All]
    
    è  All spaces are removed from the ABN
    
    
11. With the ABN column still selected, click on [Conditional Formatting] > Highlight Cells Rules > Duplicate Values
    
    è  MS Excel conditional formatting
    
    
    
    
12. Make sure there are no duplicate contacts
    Note: merge any duplicate contacts back in Xero
13. Repeat the above steps for the other version of the report
    Note: if additional duplicate contacts are found, you will need to re-run the TPAR reports one more time, to get a version of the data voided of any duplicates

3.2 Prepare the Contractor Audit Tool

1. In Dropbox, go to Working Papers > Payroll - EOPY & Pay Reviews
2. Copy the following working papers:
   • WP FYXX EOPY Contractors Audit - Xero
   • WP FYXX EOPY Contractors Audit Client - Xero
3. Paste the two worksheets in the Client's folder > Bookkeeping > FYXX > Payroll > EOPY > TPAR
4. Rename both files accordingly
5. Open the WP FYXX EOPY Contractors Audit worksheet
   
   è  The Contractors Audit Worksheet
   
   
   
6. In the [Cover] sheet, select/Enter the following details:
   • Company Name > type the client's business name
   • ABN > type the client's ABN
   • State/Primary State > Select the client's State/Primary State
   • Super check Tolerance Date > Type the oldest date the ABN was last checked
     Note: any contractors whose ABN was checked prior to the super tolerance date entered should be re-assessed for Super
   • Type of Services > Add/Remove all types of subcontracting services as per the business type
   • GL Accounts > Add/Remove all GL expense accounts applicable to both TPAR contractors and Consultants
7. Save the worksheet
8. Go to the [Xero IM TPAR Report] Tab
9. Copy all the columns from the CSV TPAR Export and paste-value [CTRL+SHIFT +V] all the data into the relevant columns of this worksheet
10. After you pasted the data from the TPAR worksheet, expand/unhide columns A & B of the worksheet and in the Source column, select TPAR for all imported rows
    
    è  The Xero IM TPAR Report Tab
    
    
    
11. Copy all the columns from the CSV Consultants Export and paste-value [CTRL+SHIFT +V] all the data into the relevant columns of this worksheet
12. After you pasted the data from the Consultant worksheet, expand/unhide columns A & B of the worksheet and in the Source column, select Other for all imported rows
13. Allocate the correct GL account to each contractor 
    
14. Save the worksheet

3.3 Export Subcontractor Data for Payroll Tax Audit

1. In Xero, go to Contacts > Subcontractors - TPAR
   
   è  The list of contacts linked to the Subcontractors TPAR Group opens
   
   
   
   
2. Click on the ellipsis icon on the top-right-hand side of the screen and select Export
3. Save the MS Excel export file in the client's folder Bookkeeping > FYXX > Payroll > EOPY > TPAR
4. Open the export file in MS Excel
5. Delete all columns except for the following:
   • Contact Name (Column A)
   • TaxNumber (Column AF)
   • PurchasesTrackingOption1 (Column AU) or PurchasesTrackingOption2 (Column AU) 
     Note: depending on whether the 'Engagement Type' Tracking Category was set up as Tracking Category #1 or #2 in the client's Xero Organisation.
6. Select the TaxNumber column
7. Press CTRL+H on your keyboard
8. In Find what type a space
9. Leave the Replace with field blank
10. Click on [Replace All]
11. With the TaxNumber column still selected, click on [Conditional Formatting] > Highlight Cells Rules > Duplicate Values
    
    è  MS Excel conditional formatting
    
    
    
    
12. Make sure there are no duplicate contacts
    Note: merge any duplicate contacts back in Xero and remove any duplicate contact rows from the CSV file
13. Also, look for contacts with a missing ABN and update these contacts accordingly
14. Save the CSV file
15. Copy all the data from the CSV export file
16. Go to the WP FYXX EOPY Contractors Audit - Xero, select the Tab [Xero-IM Contact Groups] and paste-value [CTRL+SHIFT +V] the data from the CSV file into this worksheet
17. Repeat all the above steps for the Subcontractors - Consultants Contact Group

4. Lookup Subcontractors' ABNs on ASIC

1. From the WP FYXX EOPY Contractors Audit - Xero, select the [ABN Lookup] Tab
   
   è  All the imported subcontractors' ABNs are listed in this Tab
   
   
   
2. Click on [Start Lookup]
   
   è  The ABN Lookup pop-up screen opens
   
   
   
   
3. Click on [Lookup ABN details]
   
   è  The ABN Lookup checks all ABNs against the ASIC database
   
   
   
   

5. Audit Subcontractors' Data

1. From the WP FYXX EOPY Contractors Audit - Xero, select the [ABN & GST Audit] Tab
   
   è  The ABN & GST Audit Tab
   
   
   
2. This Tab filters any subcontractors reporting the following issues:

• Subcontractors' ABN unregistered status
• Subcontractors' GST Registration status issues
• Subcontractors' GST discrepancies

The GST Check column displays the following possible ABN/GST flags, which need to be reviewed:

• Check ABN > the subcontractor's ABN status is reported as cancelled;
• Check invoice dates > the subcontractor's GST registration is reported as cancelled;
• Check GST > if the total GST for the year does not equal 1/11 of the Gross total reported.

5.1 Check ABN

Any subcontractors whose ABN has been cancelled should be reviewed as follows:

• If the ABN cancellation took place during the Financial Year, there should be no invoices posted for this subcontractor after the ABN cancellation date
• Another issue could be that the contractor changed entity type and therefore has a new ABN. In this instance, any invoices issued after the ABN cancellation date should be moved to a new contact in Xero, which includes the new entity's ABN

1. Go to the ABN Look Up tool at: https://abr.business.gov.au/
2. Type the Cancelled ABN
   
   è  The ABN Lookup website
   
   
   
3. Check the date the ABN was cancelled
4. Go to Xero and check if any Invoices were recorded after the cancellation date
5. If Xero reports any invoices dated after the ABN cancellation, contact the client and find out if this contractor has possibly changed entity type (and perhaps business name)

5.2 Check Invoice Dates

Any subcontractors whose GST registration has been changed or cancelled should be reviewed as follows:

• If the GST cancellation/change took place during the Financial Year, any invoices posted for this subcontractor after the GST cancellation/change date should be checked to ensure the correct Tax Rate has been applied.

• If the GST cancellation/change took place before the Financial Year, any invoices posted for this subcontractor for the Financial Year should be checked to ensure the correct Tax Rate has been applied.

5.2.1 Check cancelled GST Registration Dates

1. Go to the ABN Lookup website
2. Enter the ABN with the Cancelled GST
3. Click on the [Historical Details] Tab
4. Scroll down to the Goods & Services Tax (GST)
   
   è  The ABN Lookup website
   
   
5. Check the date the GST Registration was cancelled

5.2.2 Review Tax Rates

1. In Xero, go to Accounting > Find and Recode
2. Click on [Find and recode]
   
   è  The Find and Recode Screen
   
   
   
   
3. Click on Add a condition and add the following conditions:
   • Contact is > Type the subcontractor's name
   • Tax Rate is > Select: GST on Expenses 
     or GST Free Expenses, if the contractor was previously not registered and it's now registered
   • Date is after > Type either
     • 30 June of the previous Financial Year
       for Contractors whose GST was Cancelled before the Financial Year or for Non-Registered GST contractors
     • the date of the GST cancellation/change
       If the GST cancellation/ registration change happened within the Financial Year.
4. Click on [Search]
5. If the Find and Recode tool returns any results, recode the Tax Rate of the listed transactions accordingly to the correct GST registration status reported by the ASIC ABN check
6. Repeat the above steps for all Subcontractors showing a 'Check invoice dates' flag in the ABN & GST Audit Section
7. Mark any of these subcontractors as "checked" in the 'Checked' column next to the GST Check column, and make any notes in the Notes column

IMPORTANT NOTE

If you make any changes to any of the subcontractors' transaction values, you will need to export the Taxable Payments Annual Report (for TPAR contractors) and replace the TPAR data in the [Xero-IM TPAR Reports] Tab 
Refer to Step 3 of this User Guide for step-by-step instructions on how to complete this task

5.2 Check GST

There are many reasons why a subcontractor's total GST paid for the year does not equal 1/11 of the total Gross paid Invoices. This is not necessarily incorrect. However, it is still important to review these subcontractors to ensure no incorrect coding occurred during the Financial Year.

Some of the common instances include:

• The Contractor's GST registration changed during the Financial Year > in this case, it makes sense that the total GST does not equal 1/11 of the total Gross Payments. If you applied Tax Rates changes to invoice transactions due to GST registration changes, then no further action is required.
• Contractor's Invoices include non-GST transactions > if some of the subcontractors' invoices include non-GST transactions. For example, GST-free products or services or transactions posted to inter-entity loans. Once again, no further action is required
• Contractor's Invoices include Prepayments or Overpayments > if the contractor's invoices include either Prepayments and/or Overpayment transactions, no further action is required
• Tax Rates have been used incorrectly > if any transactions' tax rates have been used incorrectly. Then these transactions' tax rates should be updated to reflect the correct GST implication based on the contractor's GST registration status.

Use Find and Recode in Xero to check and update any GST issues.
Note: if you recode any GST transactions, you will need to re-run the TPAR Report and re-import the data in the EOPY Contractors Audit worksheet.

Make sure you make notes for all subcontractors reporting any ABN or GST issues

è  The ABN & GST Audit Tab

6. Contractor vs Employee Super Audit

1. In Dropbox, open the EOPY Contractors Audit Client worksheet located in the Client's TPAR folder for the relevant Financial Year
2. From the EOPY Contractors Audit worksheet, select the [Employee Super] Tab
   
   è  The Employee Super Tab
   
   
   
   
3. Copy all the rows on this Tab, then go to the [Employee Super] Tab of the EOPY Contractors Audit Client worksheet and paste-value [CTRL+SHIFT +V] the copied data
4. Insert a check box next to all copied rows
   
   è  The Employee Super Tab of the EOPY Contractors Audit Client worksheet
   
   
5. Go to Xero and check if any of these contacts have attached a copy of the employee vs contractor tool. If they did, type the last checked date in the Checked Date column of the Client Worksheet and select the option Employee or Contractor in the Empl/Contr column

8. Export the TPAR Report to PDF

After you have audited all the ABN and GST data, you can export the TPAR report to PDF

1. On the EOPY Contractors Audit worksheet, select the [TPAR Report] Tab 
2. Click on File > Print
3. Select/Enter the following settings:
   • Printer > Select: Microsoft Print to PDF
   • Settings > Select: Print Active Sheets
   • Pages: Only select the pages that have data
   • Orientation > Confirm: Portrait
   • Page Size > Confirm: A
4. Click on [Print] and save the PDF report to the Client's Folder > Bookkeeping > FYXX > Payroll > EOPY > TPAR
   
   è  The Printing screen
   
   
   
5. You can then attach the TPAR report to the Client Task in Karbon