ETP payments in Reckon accounts

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  • Updated 3 years ago
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Hi i've recently had to setup ETP payments in Reckon accounts and I followed the Reckon terminating an employee in accounts business - after entering the data the way it shows when I print off a ETP payment summary and INB payment summary the taxes are changed and aren't the same as what was recorded in the final payment cheque and termination cheque. Can someone please advise what could be wrong or help with this problem
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Kylie Stewart

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Posted 5 years ago

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Jamaiel, Employee

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Hi Kylie,


Welcome to Reckon Community!

Pertaining your query, because it involves ETP Payments, can you please let us know the following:
  1. What is the Reckon Accounts Edition and year version you are using?
  2. What Article ID or document you obtain the information for Terminating the Employee? (you can also forward us the link if it was provided to you)
  3. Is the termination for the current Financial year?
  4. Is it combining or showing the tax on the INB Payment Summary?
  5. Did you edit the tax?
  6. If you open the Paycheques now, do they still have the wrong Tax Amount?
  7. Does this amount reflect the same on the ETP Payment Summary?

Let's start with that and we'd see how it goes.

Thank you.


Kind Regards,

Jamaiel
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Janne

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I am also having this problem.  I have set up a pay item as ETP  as a Post 1983 Untaxed element.  Reckon still produces an ETP summary and calculates tax?

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Mirko, Alum

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Hi Janne, can you please provide some further details (see Jamaiel's post above) thanks.
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Mirko, Alum

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This may also be worthwhile, it contains all info on ETP's & Reckon: http://library.reckon.com.au/library/pdf/terminating%20an%20employee%202013.pdf

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Janne

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1. Reckon Accounts Hosted
2. ?
3. Yes
4. Showing tax on the ETP statement which should be 0.  Tax on INB is correct
5. No
6. the pay cheque is correct - zero tax, the ETP statement is incorrect
7. NO
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Janne

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I am aware of the ATO treatment of ETPs.  The ETP I refer to is untaxed.  Please advise what pay item I need to use to ensure that this amount is untaxed.  I have tried Untaxed element......
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Mirko, Alum

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Is this payment payment a tax-free portion of a genuine redundancy?
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Janne

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yes
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Janne

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No - sorry it is not. it is time in lieu at termination

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Mirko, Alum

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Hey Janne, please refer to your accountant or an accredited partner. As far as we understand the only ETP that are tax free are related to death and disability. - Mirko
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Kylie Stewart

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Hi I am weighing in without having read the entire thread, so apologies if I am way off course, but if the ETP is a Genuine Redundancy (refer ATO website as this is a defined term and it has to meet certain criteria to satisfy Genuine Redundancy), then there is a component that is tax-free.
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Kylie Stewart

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And this PDF contains all of the information you need to set up your QuickBooks payroll items correctly in order to have the tax calculated correctly (including the tax free component).   http://library.reckon.com.au/library/pdf/terminating%20an%20employee%202013.pdf
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Kris Harris

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I have similar issue. I have created a final pay with a Payment In Lieu ETP amount and manually calculated the tax withheld using the ATO tool. However when I print the ETP statement the tax withheld is different to that in the pay cheque. Does anyone know why? Has it got anything to do with the payroll item that was created? I selected Post June 1983 Untaxed Element (O). Does Reckon do it's own calculation of tax regardless of what was entered in the pay cheque?
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Marina

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Hello Kris,

I have the same problem - I know that the tax I calculated and entered is correct, and it's showing up wrong on the ETP Summary.  Did you get a resolution to your query?

Regards,
Marina
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Felicity Van

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Same issue here! I've just posted another topic.  component is definitely tax free - I used the ETP tax calculator on ATO website to ensure I was doing correctly.  ETP keeps showing as a tax amount
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Marina

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Hi Felicity,

I have found the info link that was mentioned in a previous post the meantime, which might help with your issues.  It seems that it doesn't matter what we enter, this goes its merry way.  But at least the tax for the INB and ETP  does add up to the correct overall amount.

http://www.reckon.com.au/library/pdf/terminating%20an%20employee%202013.pdf

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Donna Kennedy

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Help!! I am having trouble re done the ETP, Manual Tax.  So the ETP payment summary is showing $533.00 more than the tax paid and the INB Summary is $533 less.  How do I fix??

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Reckon FAQs, Employee

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Hi Marina, Felicity,

Thanks for asking the community.  ETP processing is a bit of a minefield.

Here is a guide to the whole process - ETP payments are in the second half.
Terminating an Employee in Accounts Business

Yes, ETP tax rates are not part of the PAYG withholding system and are calculated by the Payment Summary.  Its important that you calculate and enter the correct amount of tax manually when you process the termination pay.  

Please look at the explanations of the ETP Tax Tracking Types and ensure you pick the correct one.  In Brief,

The Post June1983 Untaxed Element – (R) and (O) - taxed at 46.5% for above cap amount;

Post June1983 Untaxed Element (low rate threshold) – (R) and (O) - for below cap amounts, taxed at either:
  • 17.0% for employees older than their Preservation Age
  • 32.0%, for employees younger than their Preservation Age Post June 1983 Untaxed Element
And now there is one additional levy to consider - the Temporary Budget Repair Levy.

(please check the applicable rates, who they apply to, and the threshold levels)

Make sure you have the employee's correct Date of Birth entered, and that you enter the Termination Date for both the Termination Date and Release Date fields.

Hope this helps,

regards
John
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Felicity Van

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Hi John,


I've done all of that, but the ETP is tax free - so have entered it in the pay cheque as that way, however the ETP is showing as 32% taxed.  How do I get around that???

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Marina

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Hi John,

thanks for adding the guide - sadly, my calculations were correct and the whole process of discovery would have been avoided if there had been a warning that ETP payments should be processed by themselves.  Oh well, roll on next year.

Regards,
Marina
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Reckon FAQs, Employee

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Hi Felicity,

Maybe we have a confusion of terms here.

Are you simply terminating an employee or are we processing an Eligible Termination Payment (ETP)?

All ETPs are taxed, unless they relate to death or permanent disability, or relate to earnings before July 1983.  

There are other payments on termination that are part of the PAYG system - the Lump Sum A,B,D,E. - some of these are tax-free,

Please check with your accountant which categories your payments belong.  


regards,
John
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Felicity Van

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terminating an employee - with a payment in lieu which is an ETP.  However, as this is the first payment for the 2016 financial year, when I used the ATO ETP calculator it stated that no tax should be payable on the payment as it was under the ETP caps & therefore I entered as that.
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Reckon FAQs, Employee

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Thanks Felicity,  

I'll have to get back to you on that one, not unless one of our other readers can clarify it.

regards,
John
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Felicity Van

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This reply was created from a merged topic originally titled PAYG on ETP & final payment summary incorrect.

I have created a final pay for an employee & then an ETP (the ETP has nil tax) due to the first pay for the 2016 year.



I created a new payroll item & selected no PAYG, the pay cheque is correct but when I go to print the payment summary & ETP, the ETP now has tax & the payment summary tax is less that of the ETP.



What am I doing wrong & how can I fix it? The ETP was just a payment in lieu & not a redundancy payment.  Using Reckon Accounts Enterprise 2015
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Reckon FAQs, Employee

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Hi Felicity,

Our investigations threw up this website from the ATO:
Tax Table for Employment Termination Payments

There you will find Table A:  




Reckon Accounts ETPs calculate tax according to this schedule.

For further queries about this issue you will need to talk to your accountant of the ATO.  


regards,
John
(Edited)
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Jane D'Anastasi

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Hi John,


I have an employee whose ETP Payment Summary is calculating at 49%. His taxable income is well under the cap amount and he is only 20 yrs of age. Why would Reckon be calculating this incorrectly, it should be at 32%?


Thanks,


Jane

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Kris Harris

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Hi Jane,

Have you tried selecting 'Post June1983 Untaxed Element (low rate threshold) – (R) or (O) in your payroll item?

From a previous post:

Post June1983 Untaxed Element (low rate threshold) – (R) and (O) - for below cap amounts, taxed at either:
  • 17.0% for employees older than their Preservation Age
  • 32.0%, for employees younger than their Preservation Age Post June 1983 Untaxed Element
Also have you got the employees TFN recorded in QB?

Cheers,

Kris
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Jane D'Anastasi

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Thanks Kris, I had the payroll item set incorrectly as I couldn't see the full description in the drop down when I set it up, but from your comment realised that there was a separate one for low rate threshold.
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Anna Healey

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I just had the exact same problem. Can you fix the payroll items so the full description can be seen please? I also think you need a better description of the tax tracking item to reflect what Kris has said above. Could have saved me a lot of time. Thank you.

Anna Healey

49% is marginal tax rate . For ETP you will need to do it manually to fix, most importantly seek help from own engaged accountant.
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Kris Harris

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You calculate the tax manually in the pay cheque but QB calculates the tax on the ETP statement based on the employee profile and payroll item. 

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