Termination Pay (Australia only)
KwikPay has several payments already defined to make different categories of termination payments. Each payment has been defined so that the correct tax is calculated on termination pay.
Payments for time worked or leave already taken
Use the normal 'Salary', 'Ordinary Pay' or 'Annual leave taken' pay items to enter payments for time worked or leave taken.
Payments for unused leave and long service leave
Two payments have been set up to pay accrued annual leave. 'Annual lve accrued pre 93' should be used for annual leave accrued prior to 18 August 1993; 'Annual lve accrued post 93' can be used to pay annual leave accrued after 18 August 1993.
Three payments have been set up to pay accrued long service leave. Use 'LSL accrued pre 16/8/78' to pay long service leave accrued prior to 16 August 1978, 'LSL accrued post 78 pre 93' for long service leave accrued after 15 August 1978 and before 18 August 1993, and use 'LSL accrued post 93' for long service leave accrued after 18 August 1993 if the amount was paid because the employee ceased employment under an approved retirement scheme, because of invalidity or because of bona fide redundancy.
Two payments are set up to pay leave loading. 'Lve Loading accrued pre 93' is to pay leave loading accrued prior to 18 August 1993, and 'Lve Loading accrued post 93' is for leave loading payments accrued after 18 August 1993.
Genuine redundancy payments
You will need to calculate how much of the redundancy pay is tax free. Use the ATO's guides to calculate the tax free limits, and enter that amount using the Kwik-Pay pay item 'Redundancy pay, tax free'. The amount you enter will be reported on the employee's payment summary as a 'Lump Sum D' amount.
The remainder of the redundancy pay shold be entered with the Kwik-Pay pay item 'Redundancy pay, taxable'. Kwik-Pay will calculate the tax due, and add a separate pay item, 'Lump Sum A Tax' to the employee's pay with the amount of tax due. The taxable redundancy pay will be reported on the employee's payment summary as a 'Lump sum A' amount, of type 'R', and the tax will be included in the payment summary total tax, which includes the tax on their income during the year.
Employment termination payments (ETPs)
The taxable component of a redundancy payment has to be entered in Kwik-pay using the 'Employment termination pay, taxable' pay item. Kwik-pay will calculate the tax based on whether the employee has reached preservation age. and the current ETP cap, taking the whole income cap into account. The taxable component will be reported on a separate ETP payment summary.
When adding an ETP to a pay, you also need to set a payment type code to indicate the reason for the payment. Please see ATO payment summary help page
To set the payment type:
- Click on the 'More' button at the bottom of the calculate pay form containing the ETP
- In the 'More Details' form, click the 'Misc' button
- In the 'Miscellaneous Details' form, click the 'New' button
- In the 'Property Edit' form, select 'ETPType' as the property, and then select a code for the value
- Click OK on the Property Edit form, OK on the Miscellaneous Details form, then Close on the More Details form
- When finished editing the pay, make sure you click OK to save the pay