This guide accompanies Part 2 of the SCHADS Audit Readiness webinar, which focuses specifically on payroll compliance and reporting.
In Part 1 of the series, the focus was on HR foundations such as onboarding, contracts, and classifications. This article shifts into payroll and explains how HR data flows into payroll outcomes, and how those outcomes are reviewed during an audit.
The focus here is practical and payroll-specific. It covers the payroll reports auditors typically request, how SCHADS award rules are interpreted in payroll, and how to pull together the payroll evidence needed to support an audit.
This guide is designed as a reference for NDIS providers, business owners, finance managers, and payroll administrators who want to revisit key payroll topics without having to search through a webinar recording.
Payroll evidence is a key part of preparing for a SCHADS payroll audit. It is the point where hours worked, classifications, award rules, penalties, and allowances are reflected in paid outcomes and reporting.
During audits, explanations are not enough on their own. Auditors review payroll data and compare:
Where classifications, timesheets, or pay categories do not align, discrepancies are identified quickly. That is why this session focuses on showing the payroll reports and evidence auditors typically request.
There are five payroll areas that are consistently reviewed during SCHADS audits. These are also the areas where payroll errors most commonly occur.
Auditors check that an employee’s payroll classification aligns with:
Even a mismatch of one level can result in underpayment findings. This is why alignment between HR records and payroll setup is essential.
The SCHADS Award includes a wide range of penalty conditions, including:
Payroll needs to apply these conditions accurately based on hours worked and award rules.
Allowances are one of the most common sources of SCHADS payroll errors.
This includes allowances such as:
Broken shift allowance
Sleepover allowance
Kilometre allowance
Overtime meal allowance
First aid allowance
If allowances are missing or incorrectly configured, underpayments can become significant very quickly.
During audits, leave is reviewed to confirm:
Accrual rules are correct
Leave balances are accurate
Leave loading is applied correctly
Time off in lieu is tracked appropriately
Incorrect accrual rates and leave loading errors are common audit issues.
Payroll audits also include verification of:
Auditors compare payroll data to STP year-to-date figures to ensure everything reconciles.
Auditors rely on payroll documentation to review how employees were paid and how award rules were applied.
Payroll evidence commonly requested includes:
Payroll audit data
Pay category configuration
Timesheets and rosters
Award interpretation evidence
Leave records
Superannuation records
STP submissions
Employee change history
The following payroll reports are commonly requested during SCHADS audits and are used to review pay outcomes, award interpretation, and compliance.
The videos show where to find each of these reports in Pay Cat.
This report includes:
Name and address
Start date and date of birth
Tax file declaration details
Visa and work rights
Award and employment agreement
SCHADS classification level and pay point
Employment type
This report supports the employee records section of your audit pack.
The Pay Run Audit Report is the core payroll report used during audits.
This report includes:
Hours worked
Pay categories applied
Penalties and allowances
Leave taken
Superannuation and deductions
Gross, taxable, and net earnings
This report allows auditors to trace exactly how payroll outcomes were calculated. It is recommended to export this report for two or three pay runs.
Auditors want to understand how payroll is configured, not just what was paid.
Pay category and pay rate template exports show:
Rate multipliers
Penalty rates
Allowance configuration
Whether super applies
Leave accrual rules
These exports demonstrate how SCHADS award rules are set up in payroll.
Timesheet reports are used to support payroll outcomes.
Auditors compare timesheets to payroll to review:
Start and finish times
Breaks taken
Work types
Sleepover versus active hours
This helps verify overtime triggers, minimum engagements, and allowance eligibility.
If you use the Pay Cat rostering feature, the roster versus timesheet comparison provides a clear view of how planned shifts compare to actual hours worked.
This comparison is particularly useful during an audit because it allows you to quickly identify and explain differences between rostered hours and submitted timesheets. It gives auditors a clear, system-generated view of where variations occurred, rather than relying on manual explanations or assumptions.
The comparison can be exported and included as supporting payroll evidence where required.
The following reports are commonly used to review leave compliance during a SCHADS payroll audit:
Leave History Report
Leave Liabilities Report
These reports provide visibility into leave accruals, leave taken, current balances, and leave costs as at a selected date.
Superannuation reports are used to review how super has been calculated and paid through payroll. This includes confirming:
Super guarantee amounts
Contribution timing
Fund details
Payment status
These reports help confirm that superannuation has been calculated correctly and paid in line with payroll records.
STP year-to-date data can be exported and compared to payroll totals to confirm that reporting is accurate.
The STP report includes:
Payroll year-to-date figures
STP year-to-date figures
A variance tab
Any variance identified needs to be reviewed and reconciled.
The Employee Audit Report provides a change log showing:
This report supports explanations of historical payroll changes during an audit period.
Certain SCHADS award rules are more likely to result in payroll errors and audit questions. These areas require particular care when reviewing payroll data and preparing payroll evidence.
Under the SCHADS Award, minimum engagement rules apply when an employee works less than the required minimum hours for a shift.
When this occurs:
Payroll tops up the paid hours to meet the minimum engagement requirement
The top-up appears as additional paid hours in payroll
The rate applied matches the employee’s SCHADS classification
This can result in payroll hours exceeding timesheet hours, which is expected when the award is applied correctly.
Under the SCHADS Award, overtime applies based on both daily and period thresholds.
Overtime may be triggered when:
An employee works more than the daily ordinary hours limit
An employee exceeds weekly or fortnightly ordinary hour limits
When overtime applies, payroll needs to correctly identify the trigger point and apply the appropriate overtime pay category and rate. Accurate overtime application is commonly reviewed during payroll audits to ensure employees have been paid correctly for extended hours.
Shift penalties under SCHADS depend on when work is performed.
These penalties may apply based on:
Shift start and finish times
Whether the shift falls in the afternoon or night period
Weekend or public holiday work
Payroll applies the relevant penalty rate based on these conditions. During an audit, shift penalties are reviewed to confirm the correct rate was applied for the time worked.
The SCHADS Award provides for a kilometre allowance when employees are required to use their own vehicle for work-related travel.
In payroll, this allowance is recorded based on the number of kilometres travelled and is paid in line with award conditions. The allowance includes both taxed and untaxed components, which supports correct payroll and STP reporting.
During audits, kilometre allowance records may be reviewed alongside timesheets and travel logs to confirm the allowance was applied correctly.
Broken shift allowances apply when an employee works two or more shifts in a single day with a break exceeding one hour between shifts.
When a broken shift occurs:
A broken shift allowance may apply
Additional penalties may apply if the total span of hours exceeds 12 hours
Broken shifts are a common focus in SCHADS payroll audits, particularly where support work is delivered across multiple client visits in a day.
Sleepovers under the SCHADS Award are paid as a fixed allowance rather than an hourly rate.
Key conditions include:
Active work before and after the sleepover is paid separately
At least one side of the sleepover includes a minimum of four hours of work
Sleepover periods are not fixed to specific start and finish times
If minimum conditions are not met, payroll may apply a top-up to ensure award requirements are satisfied. Sleepovers are frequently reviewed during audits due to their complexity and the number of conditions involved.
SCHADS payroll audits require a structured payroll audit pack that brings together the key payroll records used to review compliance.
This typically includes:
Organising this evidence clearly helps streamline the audit process and makes it easier to respond to information requests as they arise.
Preparing payroll evidence for a SCHADS audit often involves collating multiple reports and supporting records.
Some providers choose to manage this manually using their own internal processes. Others prefer to work from a structured checklist to ensure nothing is missed.
If you prefer to work from a checklist, we’ve created a SCHADS Payroll Audit Checklist that brings together the key payroll reports and evidence outlined in this guide. It’s designed to help you systematically review your payroll setup and confirm you have the required documentation ready.
You can download the checklist here:
https://www.paycat.com.au/schads-audit-payroll-checklist
Using a checklist can help confirm that all required payroll reports, supporting records, and reconciliation steps have been completed before information is provided to an auditor.
In some cases, auditors will ask why a particular penalty, allowance, or top-up was applied, rather than simply confirming that it was paid.
Historical pay runs can show the specific SCHADS award clauses that applied on a given day. This allows you to show:
Which SCHADS clauses triggered
Why a penalty or allowance applied
How payroll interpreted the award rules for that shift
This type of evidence is not usually requested upfront, but it can be useful when explaining differences between timesheets and payroll outcomes, such as minimum engagement top-ups, broken shifts, or sleepover conditions.
Clause-level data can be exported and included as supporting payroll evidence where required.
If you’re preparing for a SCHADS audit, the following resources may be useful alongside this guide.
You can revisit the SCHADS Payroll Audit Readiness webinar (Part 2) on demand to review the payroll reports, award interpretation examples, and audit preparation steps covered in this article.
If you haven’t already, Part 1 of the SCHADS Audit Readiness series focuses on HR foundations, including onboarding, contracts, and classifications. This provides important context for how HR data feeds into payroll outcomes.
To support your preparation, you can also download the following checklists:
SCHADS HR Audit Compliance Checklist, covering core HR records and documentation commonly reviewed alongside payroll
SCHADS Payroll Audit Checklist, designed to help you systematically review payroll reports, reconciliations, and supporting evidence
If you’d like to see how Pay Cat supports SCHADS payroll compliance in practice, you can also book a demo with our team. A demo gives you a walkthrough of how payroll reporting, award interpretation, and audit-ready evidence work within Pay Cat payroll, and whether it’s the right fit for your organisation.
We specialise in SCHADS payroll and are the only solution with 100% compliant SCHADS Award interpretation, independently reviewed. Our payroll systems are configured to apply the correct classifications, pay rates, penalties, and allowances automatically, reducing reliance on manual checks and adjustments.
For NDIS providers operating under the SCHADS Award, Pay Cat payroll is designed to handle complex conditions such as broken shifts, sleepovers, minimum engagements, overtime, and allowances, helping businesses run payroll with greater confidence and consistency every pay run.