New Financial Year, New Obligations: Why July is the Best Time for a Wage Audit

The start of a new financial year is more than just a time for budgeting and BAS prep — it’s the ideal moment for Australian SMEs to conduct a wage audit. With 2025 already bringing significant legislative changes, including new wage theft laws and Fair Work updates, it’s never been more important to start the financial year with your payroll house in order.

In this article, we’ll explain why July is the best time to review your wage compliance, how to run a wage audit aligned with financial year planning, and what changes SME owners need to be aware of for 2025/2026.

Why Time Your Wage Audit with the New Financial Year?

Aligning your wage audit with the start of the financial year offers several strategic advantages:

1. Sync With Tax and Payroll Reporting Cycles

The new financial year means:

• Finalisation of Single Touch Payroll (STP) for the prior year
• Lodgement of PAYG summaries
• Resetting leave accruals, payroll ledgers, and accounting systems
• Implementation of updated award rates and superannuation thresholds

A wage audit in July ensures that your payroll setup reflects all changes and avoids flow-on errors into the next 12 months.

2. Reflect Legislative Updates in Real Time

From 1 July 2025, businesses must incorporate several new compliance obligations, including:

• Superannuation on Paid Parental Leave
• Continued rollout of the right to disconnect
• Adjustments to modern awards following Fair Work Commission rulings
• Preparations for “pay-day super”, which will require superannuation to be paid on the same day as wages by 1 July 2026

Conducting a wage audit at this time allows you to identify any changes needed in contracts, classification, or entitlements — before you accrue risk.

3. Fix Issues Before They Snowball

Errors made early in the year — like incorrect base rates or missed allowances — can accumulate fast. An early-year wage audit:

• Catches underpayments or overpayments before they scale
• Lets you adjust payroll processes immediately
• Reduces the risk of back pay claims, Fair Work complaints, or reputational damage
• Helps avoid breaching wage theft laws, which now apply criminal penalties for intentional underpayment

Key Areas to Focus On in Your July Wage Audit

Here’s what every Australian SME should review in their new financial year wage audit:

1. Employee Classifications and Contracts

• Reconfirm employment types: casual, part-time, full-time
• Update contracts in line with new casual conversion entitlements
• Ensure any role or hours changes are properly documented

2. Award Rate Updates

• Apply new award wage increases released by the Fair Work Commission
• Review allowances, penalty rates, and overtime thresholds
• Ensure leave loading and public holiday entitlements are calculated correctly

3. Superannuation Compliance

• Check that the superannuation guarantee rate is updated in your system (11% in FY 25/26)
• Ensure all eligible employees are receiving super on bonuses, loadings, and now Paid Parental Leave
• Prepare your systems for real-time super payments (required by July 2026)

4. Leave and Entitlements Balances

• Reconcile accrued leave from the previous financial year
• Check annual leave loading has been correctly applied
• Review and update parental, long service, and personal leave records

5. Payroll System Settings and STP Reporting

• Revalidate STP Phase 2 compliance
• Ensure ATO pay codes, income types, and reporting categories are correctly mapped
• Test automation rules, rounding settings, and approval workflows in your payroll software

Use Technology to Streamline Your Wage Audit

Modern payroll platforms make mid-year wage audits easier than ever. Look for software with:

• Automated award rate updates
• Built-in compliance checks and alerts
• Audit-ready reporting features
• Single Touch Payroll Phase 2 capabilities
• Integrated time and attendance tools

Best Practices for a Smooth Start to FY25/26

• Schedule your wage audit for July or August to catch issues before Q1 BAS lodgement
• Assign a compliance lead or use a third-party service to conduct the review
• Keep detailed documentation of findings, decisions, and corrective actions
• If you uncover an error, notify affected employees early and set up a clear repayment or adjustment plan
• Stay subscribed to Fair Work and ATO updates to catch future changes before they affect your payroll

Start Strong, Stay Compliant

Wage audits aren’t just a risk mitigation tool — they’re a strategic advantage. Conducting your audit at the start of the financial year sets the tone for the next 12 months, ensuring that your payroll practices are clean, compliant, and future-ready.

For Australian SME owners, July offers a natural and powerful window to review wage structures, super obligations, and award rates. Don’t wait for an employee complaint or Fair Work inquiry — take charge now, and build a foundation of trust and compliance that lasts all year.

‍

‍