Once the 'terminate Employee' action has been selected within a pay run (see here for instructions on how to terminate an employee within a pay run), you are able to check the "ETP/Redundancy" option that appears in order to be able to process the following ETP payments:
- Type R - e.g. genuine redundancy, early retirement scheme, invalidity, compensation
- Type O - other ETP payments not included in Type R
- Type S - where a Type R ETP was made in a previous financial year and another ETP is made in the current financial year relating to the same termination
- Type P - where a Type O ETP was made in a previous financial year and another ETP is made in the current financial year relating to the same termination
This article contains information on how to process the above ETPs, as well as links to other useful information.
How to process specific employment termination payments
The follow articles provide detailed information on processing each of these payments:
- Processing Employment Termination Payments – Type R & Type O
- Processing Employment Termination Payments – Type S and Type P
Override ETP Payment Amounts
When generating an ETP payment for an employee, there are times where you may need to override the ETP values due to variances in the PAYG, Taxable components or other amounts.
This article will show you how to override ETP values within a pay run.
PAYG on termination payments
This article will explain how PAYG is calculated on termination payments.
Opening balances and ETPs
If you are migrating terminated employees' data across to this payroll system, you can include ETP data so that you only need to access one system for reporting and payment summary purposes. You are able to select the following ETP payments:
- Type R - e.g. genuine redundancy, early retirement scheme, invalidity, compensation
- Type O - other ETP payments not included in Type R
- Type S - where a Type R ETP was made in a previous financial year and another ETP is made in the current financial year relating to the same termination
- Type P - where a Type O ETP was made in a previous financial year and another ETP is made in the current financial year relating to the same termination
Take note of the field 'Generate ETP Payment Summary'. The default value is 'No' - if you leave this option as is, the employee's ETP Payment Summary will not be published and so the employee will not have access to it. If you change the value to 'Yes', the employee's ETP Payment Summary will automatically publish and they will be able to access this via their employee portal.
Tax reporting for ETPs
STP reporting
When a pay run containing an ETP is finalised, the corresponding STP pay event will specify:
- the total taxable components;
- any tax free component
- total tax withheld
- ETP code
and report to the ATO once lodged. If there are multiple ETPs of the same type, these will be reported as one amount.
The employee is automatically marked as 'is final' within the STP pay event.
Employment termination payment summaries
Businesses which are exempt from STP reporting – ie WPN holders – must provide the employee with a 'PAYG payment summary – employment termination payment’ (ETP payment summary) within 14 days of making the payment.
Once the pay run has been finalised an ETP payment summary is generated. A separate payment summary is created for each ETP type, although multiple Type payments are reported together. The payment summary will display:
- the total taxable component;
- any tax free component
- total tax withheld
- ETP code
ETP payment summaries are available on the employee portal under ‘Documents’ > ‘Payment summaries’. Businesses can send a notification to the employee from the employee file under ‘Employee management’ > ‘Payment summaries’ or from Reports > ATO reporting > Payment summaries under the ‘Employment termination payment’ tab.
Useful ATO Resources
Employment termination payments worksheet
Working out the tax free component of an ETP
If you have any questions or feedback, please let us know via support@yourpayroll.com.au.
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