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  • When an employee transfers or leaves

    You must provide information in your STP Phase 2 report when employees leave. This will reduce the need to provide them with an employment separation certificate.

    Termination payments

    There are some kinds of payment you make to an employee when their employment with you ends.

    Each of these amounts must now be reported against an income type and (for some income types) a country code.

    There are also changes to the way you report a payment of unused leave on termination.

    There are no other changes to any of the other amounts you may pay when an employee leave including:

    Unused leave on termination (paid leave type U)

    Unused leave paid on termination that was previously reported in Gross in your STP Phase 1 report must now be reported as unused leave on termination (paid leave type U) in your STP Phase 2 report.

    The following table outlines what should and shouldn't be included in Unused leave on termination (paid leave type U).

    Unused leave on termination (paid leave type U)

    Include in paid leave type U

    Do not include in paid leave type U

    • annual leave or leave loading accrued Post-17 August 1993 paid on a normal termination (for example, voluntary resignation, employment terminated due to inefficiency, retirement)
    • long service leave accrued post-17 August 1993 paid on a normal termination (for example voluntary resignation, employment terminated due to inefficiency, retirement) 

     

    • annual leave or leave loading accrued post-17 August 1993 paid on termination for genuine redundancy, invalidity or early retirement scheme reasons – you should report this as lump sum A
    • unused annual leave or leave loading paid on termination that accrued before 17 August 1993 – you should report this as lump sum A
    • long service leave paid on termination that accrued between 16 August 1978 and 17 August 1993 – you should report this as lump sum A
    • long service leave paid on termination that accrued before 16 August 1978 – you should report this as lump sum B

     

    Lump sums

    When you report lump sums through STP, you must include an income type and country code. You must also include the type of lump sum and the YTD amount. The type of lump sum is represented by a code.

    The lump sum type codes you can include in your report are:

    There are also lump sums you can report which are not paid when an employee leaves:

    Lump sum A

    Lump sum A is for certain unused leave that is paid out on termination.

    When reporting lump sum A, you need to report the lump sum type code of R or T.

    • Lump sum type code R – for all unused annual leave or annual leave loading, and the component of long service leave that accrued from 16 August 1978 that is paid out on termination only for genuine redundancy, invalidity or early retirement scheme reasons.
    • Lump sum type code T – for unused annual leave or annual leave loading that accrued before 17 August 1993, and long service leave that accrued between 16 August 1978 and 17 August 1993 that is paid out on termination for reasons other than genuine redundancy, invalidity or an early retirement scheme.
    Lump sum B

    Lump sum B is for long service leave that accrued before 16 August 1978 that is paid out on termination, no matter the reason for termination.

    When reporting lump sum B, you should report the whole amount even though the employee will only be taxed on 5% of it.

    You cannot report lump sum B for employees whose date of birth is later than 16 August 1978.

    Lump sum D

    Lump sum D represents the tax-free amount of only a genuine redundancy payment or approved early retirement scheme payment, up to the tax-free limit, based on the employee’s complete years of service, for an employee up to their age-pension age.

    You need to report lump sum D amounts even if they are the only amount you pay your employee in the financial year. This is different to STP Phase 1.

    Employment termination payments (ETPs)

    When an employee leaves, you may pay them an ETP.

    If you make an ETP you must report the:

    • date you paid it
    • type of ETP it is
    • amount you paid, itemising the non-taxable (for life benefits only) and taxable components
    • amount you have withheld from the ETP.

    ETPs are different to the other amounts you include in your STP report because you do not report them as YTD amounts. Instead you report each amount by payment date and type.

    You must now also include an income type and country code for each ETP you report.

    ETP types you can report

    ETP types help us to identify factors such as whether the ETP is a life benefit or death benefit, the reason it is being paid and the recipient. There are 8 ETP types you can report.

    1. Genuine redundancy or early retirement scheme payments (ETP type R) – a life benefit paid only for reasons of          
      • genuine redundancy to employees under their pension age or earlier age of mandatory retirement
      • invalidity
      • an ATO approved early retirement scheme
      • compensation for personal injury, unfair dismissal, harassment or discrimination.
       
    2. Other reasons (ETP type O) – a life benefit paid for reasons other than for ETP type R.
    3. Split ETP type R (ETP type S) – multiple payment of life benefit ETP type R for the same termination of employment, where the later payment is paid in a later financial year than the original payment.
    4. Split ETP type O (ETP type P) – multiple payment of life benefit ETP type O for the same termination of employment, where the later payment is paid in a later financial year than the original payment.
    5. Dependant (ETP type D) – a death benefit payment directly to a dependant of the deceased employee.
    6. Non-dependent (ETP type N) – a death benefit payment directly to a non-dependant of the deceased employee.
    7. Split ETP type N (ETP type B) – a multiple payment for a death benefit ETP type N for the same deceased person, where the later payment is paid in a later financial year than the original payment.
    8. Trustee of deceased estate (ETP type T) – a death benefit payment directly to a trustee of the deceased estate.
    Paying an ETP to a death beneficiary

    There are special rules for reporting ETPs you pay to death beneficiaries of a deceased employee. These include:

    • the identity information you report (such as TFN, name, address or date of birth) must belong to the death beneficiary, not the deceased employee. If you do not have the death beneficiary's TFN, use the relevant TFN exemption code
    • reporting either the Payroll ID of the deceased employee or a new one you have assigned to the death beneficiary in your payroll solution
    • reporting a commencement date of 01/01/1800 for the death beneficiary
    • reporting an employment basis code of D for the death beneficiary
    • reporting a tax treatment code of DBXXXX for the death beneficiary.

    If the death beneficiary is also an employee on your payroll, you should report their actual commencement date, employment basis and tax treatment code.

    Outstanding salary or wages, paid leave taken, allowances, overtime, bonuses and commissions, or directors’ fees that were payable upon death of the employee, but not paid to the employee before death are not ETPs. Do not report these through STP.

    Some payroll solutions may allow you to report the non-taxable component for death beneficiaries. This is acceptable.

    Paying ETPs in multiple instalments

    If you pay the ETP in multiple instalments, you must report each payment separately.

    If you pay multiple ETP types on the same day, they must still be identified separately if the ETP type code is different. You must not add the payments together and report the payments as a YTD figure unless they are paid on the same day and are the same type.

    Cessation date

    You must report your employees’ cessation date when they leave.

    If you make another payment to that employee after the cessation date (for example, an ETP), you do not need to update the cessation date.

    Cessation reason

    There are many reasons why employees leave, and you will need to include the reason in your STP report.

    Cessation reasons you can report are:

    • Voluntary cessation (V) – an employee resignation, retirement, domestic or pressing necessity or abandonment of employment
    • Ill health (I) – an employee resignation due to medical condition that prevents the continuation of employment, such as for illness, ill health, medical unfitness or total permanent disability
    • Deceased (D) – the death of an employee
    • Redundancy (R) – an employer-initiated termination of employment due to a genuine redundancy or approved early retirement scheme
    • Dismissal (F) – an employer-initiated termination of employment due to dismissal, inability to perform the required work, misconduct or inefficiency
    • Contract cessation (C) – the natural conclusion of a limited employment relationship due to contract/engagement duration or task completion, seasonal work completion, or to cease casuals that are no longer required
    • Transfer (T) – the administrative arrangements performed to transfer employees across payroll systems, move them temporarily to another employer (machinery of government for public servants), transfer of business, move them to outsourcing arrangements or other such technical activities.

    Transferring or rehiring an employee

    Sometimes you may transfer an employee between different combinations of ABNs and branches within the same payroll solution, or from one payroll solution to another.

    When you do this, it may impact on what you report as an employee’s commencement date, and whether you report cessation date and cessation reason.

    Commencement date

    When you transfer or rehire an employee, the commencement date you report after the transfer or rehire depends on the way you have processed it in your payroll solution. Your payroll solution will determine the date to use in most cases.

    If you:

    • are only moving the employee to a different combination of ABN and branch, the commencement date you should report is the start of the employment relationship. If this is unavailable, report the date you recognise for prior service
    • transfer the employee in your payroll solution by terminating and rehiring them and          
      • assign them a different Payroll ID, report the rehire commencement date
      • terminate and rehire in the same pay period for the same combination of ABN and branch with the same Payroll ID, you do not need to report the rehire commencement date
      • terminate and rehire for a different (related) combination of ABN and branch (regardless of the pay period), your payroll solution will determine if you report the rehire commencement date or the earliest recognised date for service. Both are acceptable.
       

    Cessation date and reason

    When you transfer or rehire an employee, the way you report cessation date and reason before the transfer or rehire depends on the way you will process it in your payroll solution. Your payroll solution will determine the date to use in most cases.

    If you:

    • are only moving the employee to a different combination of ABN and branch, do not report any cessation date or reason. This is because there is no cessation to report
    • transfer the employee by terminating them from your current payroll solution and rehiring them in a new payroll solution, report the cessation date and reason code
    • terminate the employee and later rehire them in the same combination of ABN and branch then          
      • report the cessation date and reason you terminate. If the employee is rehired using the same Payroll ID and you have not yet reported a cessation date, the cessation date should not be reported
      • if the employee is rehired using the same Payroll ID, you should stop reporting the cessation date and reason
       
    • terminate the employee and rehire them in the same pay period in a different combination of ABN and branch within the same group, the cessation date does not have to be reported.

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    Last modified: 14 Jul 2022QC 66099