ETP - ATO code issues - Web and App operation

frank_10114727

Dear Rav,

Sorry to bother you again. I need to issue ETPs to four or five staff involved in 'genuine redundancies' (in ATO terms).

I cannot seem to get the Web version of R-Payroll to show me the ATO tax codes (R, or O) applicable to different elements of the payout. On the App version, I managed to get the tax code options A-R and A-O to display for Termination - Annual leave payout plus two or three others which did not reflect tax codes in the ATO's publications about ETPs.

As per the help-notes in the App version, I tried to create a 'Termination Sick leave payout' pay category, but I had no luck in getting this pay category to offer me any ATO tax codes. The code I need in this case is 'O' which does not obligatorily add to the income-tax calculation which follows on specifying the rate/hours which need to be paid out for tax-free categories of ETPs.

My accountant has confirmed compliance in these needed payments with all ATO 'caps'.

I'll be most grateful once again for your help with these puzzling (for me!) issues

Sincerely,

Frank

Rav

Good to hear from you again Frank 🙂

Its pretty simple in Reckon Payroll as there is a specific termination process along with a termination payment for the employee.

Simply select the employee you need to terminate, select Options and then Terminate Employment.

This will then bring up an option for you to select the cessation reason which will assign the relevant code when it comes to the termination.

Reckon Payroll will then prompt you to create the final termination payrun for the employee. Within that termination pay run, you may/will need to amend the tax amount.

frank_10114727

Many thanks Rav. I have had better. (but not total) success today with my Payroll Web version. Firstly, the dropdown menu from the above 'terminate employment screen' is now different. The screen in the example does not allow for 'genuine redundancy' as well as 'non-genuine redundancy' (In ATO terms).

Anyway, the Reckon Web version allowed me to select a category of pay item: in this case, I selected 'redundancy pay', and this pay item allowed me to specify 'R' or 'O', or a range of other (not-relevant-to-me) ATO categories relating to death or previous financial years etc.

Having specified 'R' for this employees 'unused Annual leave' category, (and included this terminating employee's correct gross $$ amount), I needed to specify the 'taxable component' and the 'non-taxable component'. I was able to specify the correct Withholding tax for this item in the 'R' ATO category.

Then, I had to add to this pay run for this same employee, the amount of $$ owing for 'unused sick leave'

I could find no way to do this manoevure? - Perhaps I have missed something?? - I tried to add another income item in the same pay run, but the 'redundancy pay' pay item no longer offered me the obligation to specify ATO category 'O', or indeed any other ATO Tax category. Your help fishing me out of this dilemma will be much appreciated. As always, sincere thanks!

Frank

Rav

Hi Frank

I don't think I'm quite following the path you've gone down 🤔

Lets just rewind a little, you've mentioned the terminate employment screen is different to that of my screenshots above. Are you able to add a screenshot of what you're seeing on-screen just so I'm on the same page.

Then, I had to add to this pay run for this same employee, the amount of $$ owing for 'unused sick leave'

If you wish to pay the balance of personal leave in the termination pay run, then you need to ensure the personal leave item has that option ticked in its setup. See screenshot below.

Go to Settings ➡️ Pay Items ➡️ Select your Personal Leave item ➡️ Edit ➡️ Select the option to pay on termination

This will then allow any unused personal leave balance remaining for an employee to be included in the termination pay run.

klaura

Hi frank_10114727,

You could give this a shot.

Make a termination pay by going to Settings>Pay Items>Earnings.

You can then use the termination wizard until you are prompted to generate a Final pay.

On the Final pay, in addition to OTE, you must use the Termination Pay you previously created on the pay run. In order to include the tax component, as indicated in the image below.

Click on the Termination in PAYG Tax to add the Tax component.

frank_10114727

Hi Rav and Laura, - Many thanks for your combined help! (I contacted the Reckon 'Help' desk late on Sunday and am very grateful for your note above Laura) - I am in the process of trying out the pathway you have suggested Laura using the Reckon-payroll-web version.

Rav, in answer to your question, I am attaching an image of the dropdown menu I see once I attempt to do a termination for one of my colleagues who is genuinely redundant (in Tax office terms). I have also followed Laura's advice and gone through the process suggested. (I am including screenshots of the key steps I have taken for my staff member whose untaken ARL and untaken sickleave and tax component are listed below.

From my Accountant's advice, the ARL payout is ATO category 'R' (which attracts in this case 32% withholding tax, and the Sickleave payout is category 'O' - which is tax-free :

In my attached screen-shots document, I have trimmed off my terminating employee's name and details) -

Given Rav's suggestions, I have checked my 'earnings' pay items, but do not have one entitled 'Personal Leave' (See Screenshot 7) - My attempt at creating a 'sickleave payout' item did not allow me to tick a box to 'Pay on termination' as Rav suggested it might.

Thus I just continued to use the 'redundancy' pay item for the sickleave payout, and specificed in the Tax box, that this component was category 'O', with no tax withheld. Rav and Laura, I wonder whether you could confirm that the tax office will receive the correct ATO labelling for the amounts owing to this staff member, if I just continue to use the 'Genuine Redundancy', and the ETP is simply submitted with the figuring shown in Screenshot 6.

I am extremely grateful for your assistance with this problem. Of course I am anxious to complete this matter in the next day or so, since my five affected redundant staff left me on September 30th.

klaura

Hi frank_10114727,

Yes, the ATO will receive STP reports with all taxable components. Although you might not see it while submitting, the values will be reported in accordance with how you allocate them.

frank_10114727

Wonderful! - Many thanks for your confirmation of this point Laura. My accountant will be delighted to learn that with all my stumbling around in the dark with these issues to date, you can confirm that my STP submissions of ETPs for each of my staff will have the correct codings for the ATO.

One final question: if you look closely at Screenshot 6, you will see in small print under 'Total Termination payments', a statement is made that this amount is 'Excluding leave payments on termination'??

Of course this is incorrect, because my two payments 'R' and 'O' are both technically and actually 'leave payments'

Id be grateful if you could still confirm that the Tax Office will get the correct figuring of these payments?

Rav

Hey Frank

I think this is heading beyond our level of expertise to be honest but I've just flicked through an access request to your Reckon Payroll book. Can you please check your email and grant access when you have a moment.

I can't make any guarantees but I'd like to see if there's any info I can get from our product team around your query.

frank_10114727

Done Rav and Laura.

BIG thankyou for all your time help and attention

Frank

Rav

Hi Frank

Our awesome product manager for Reckon Payroll has taken a look at your query and has put together some info for you which I'll list below.

_________________________________________________________________________________________________________

Any item created with the Earnings type of Termination will report as ETP.

When entering a value in a termination pay, using this type of pay item, an ETP code is required. If you have been advised to enter unused sick leave as an ETP under code O, then from what you've advised above you have entered this correctly.

In regards to annual leave however, can you please clarify if you have been advised if this is also an ETP, or if this should be reported as Unused Annual Leave - Type A code R?

If it is the latter then you will need to remove this from the ETP, code R.

You will then need to add the Annual Leave pay item in the termination payrun, by selecting the Add option under Earnings and Leave section in the pay run. Example screenshot on the left.

Select the Annual Leave item and enter the relevant rate and hours.

When saved, if the Termination reason is set to Redundancy or Ill health, the leave will default to Lump Sum A code R.

If you are not seeing this, you can easily change the reporting category by following the help guide -

https://help.reckon.com/article/tdgk5jy6mt-terminations#assigning_different_reporting_categories

frank_10114727

Thanks for this additional advice. I've run into a strange problem with the Annual Leave pay item. In some cases the pay item appears to add some sort of loading to the hourly rate x hours worked???

If you look at this entry you will see that 78.2632 x 37.5 does NOT make $2964.21 - It adds to $2934.75. The next screen after typing 'done' shows you why:

You can see that the 'Base rate (inc loading) quotes $79.0457 as the rate

I have checked the 'pay item' chart for 'Annual leave', and it specifically says this pay item does not include a 'loading'

On other terminating staff this aberration does NOT occur and 'Annual Leave' pay item: viz the amount calculated for a specified hourly rate IS correct.

As you have access to my dataset, I would be most grateful Rav if you could ask your experts to help me with this strange problem? (I appreciate it is probably something I and doing wrong!!!)

Frank

frank_10114727

Incidentally, I have made the system repeat the same error with another of my staff. When I tried to adjust the Tax associated in this second case, I received the following message:

klaura

Hi frank_10114727,

Make sure that the Leave loading field is empty. To check Go to Employees> Leave

You can totally delete any value in that field. Then try to process the payment again.

frank_10114727

Thanks Laura and Rav, Removed all apparent data from the 'annual leave' pay item, but still got the same error when reinserting the hours x hourly rate:

Here is my pay-item 'annual leave' after I had gone through and zeroed out anything except the need to include this item in a 'termination pay'

2023-10-12_14-18-35.pdf

Please let me know if there is anything else I can try?? - Sincere thanks for all you help. I will try completely deleting this particular termination and putting it in again right from the start. I will let you know immediately if I get any different outcome from the erroneous alteration of the pay rate I put in. Thanks again