Termination Payment and Long Service Leave

Julie C

Hi,

We have an employee that has terminated their employment. They commenced employment in 2014 as a casual, completed an apprenticeship which commenced in 2016 and has been employed full time after completion until present. They will be eligible for LSL. How is this processed when completing the final paycheque. I am using Reckon Hosted 2022. Thanks

Kris_Williams

If you know how much LSL they are entitled to you will have to enter this in his leave details tab and select it on a new line when processing the pay. If you need to work it out the easiest way is to go to the Long Service Leave calculator online

Julie C

Thanks Kris, I have done this. It is 6.9 weeks. Is it taxed differently if paid out as a termination payment?

Kris_Williams

I can’t answer that sorry, might be a question for your accountant or the tax dept.

I have usually treated payments like this by averaging out over the financial year to date and seeing how much tax would be deducted if it was paid weekly and them multiply that by the number of weeks.

Acctd4

RAH is only able to calculate standard PAYG scenarios due to the fact that there are some complex tax calculations for various components of terminations on the ATO website. RAH will usually overcalculate so I just go with the RAH calcs as the employee will get back any excess PAYG entitlement when they do their tax return.

Note: Terminations can include Lump Sums & ETPs however unused Annual Leave & Loading accrued from 18/08/93 (as in your case) is taxed at marginal rates & is just included in the standard gross, not shown separately.

In summary:

ETPs

• Redundancy payments over tax-free limit
• Payouts of unused Sick/Personal Leave or RDOs
• Payments in lieu of notice,
• Compensation for loss of job or wrongful dismissal
• Ex-gratia or "golden handshake" payments
• Some payments made after death
• Early retirement scheme payments above tax-free limit
• Property transfers

Lump Sum A

• Unused Annual Leave & Leave Loading accrued up to 17/08/93
• Unused LSL accrued from 16/08/78

Lump Sum B

• Unused LSL accrued up to 15/08/78

Lump Sum D

• Genuine Redundancy & Early retirement scheme payments up to Tax-Free limit

Zappy

You ought not be getting tax advice from people whom you arent paying and will not be accountable when you get it wrong. Ring the ATO. And get a receipt. Sharon, you shouldn't be giving tax advice either. You know better. You know the law.

Julie C

Thanks Shaz, I have 4 weeks leave and 6.9 weeks LSL to payout. Do I create a new payroll item for Lump Sum A payments and process the final pay under Other Payroll Items.

There is a payroll item called "Eligible Termination Payment-Addition-Post June 1983 Untaxed Element (low rate threshold R)-Payroll Expense"

Acctd4

Hi Julie

It won’t be an ETP - ETPs do not include unused AL or LSL. In this case all the Leave will be taxed at marginal rates as part of the standard gross. Therefore you can just use your standard AL & LSL Payroll Items.

NOTE: Any unused AL (incl any Leave Loading) & LSL - accrued after 17/08/93 - is only paid as a Lump Sum IF it’s a redundancy.