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ANSWER ID:33014

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The Paid Parental Leave scheme is Leave is a government scheme where paid parental leave is offered to eligible working parents. The government pays the money to the employer to pass on to the employee.

For the current rate of paid parental leave and its and its tax implications, seek seek advice from the ATO or the Family Assistance Office website.

The setup described below is below is one way of tracking paid parental leave. Depending on your parental leave reporting obligations, you may want to track your parental leave differently. Your accounting advisor or Your accounting advisor or the ATO will be able to provide clarification on the on the appropriate solution for your circumstances.

Here's what we'll cover in this support note:

Set up the required accounts

Create a new wages category

Exempt Paid Parental Leave from calculating superannuation

Exempt Paid Parental Leave from accruing entitlements

While the employee is taking paid parental leave

Receive the payment from the government

When the employee returns to work

Record a clearing journal entry

Paid parental leave and payment summaries

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title	1. Set up the required accounts

The steps below describe how to create

3 new

three new accounts to track your

Parental

parental Leave

(

:

a liability account

,

an income account

, and

an expense account

). Remember - this is an example only and depending on your Parental Leave reporting obligations, you may want to track your parental leave differently. Therefore, you should speak to your accountant or the ATO for the appropriate solution for your circumstances.

Create a liability account

Go to the Accounts command centre and click Accounts List.
Click the Liability tab.
Click New. The Account Information window appears.
Enter an Account Number and Account Name which suits your account list.

See our example below.

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Here's our example:
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Click OK.

Create an income account

Go to the Accounts command centre and click Accounts List.
Click the Other Income tab.
Click New. The Account Information window appears.
Enter an Account Number and Account Name which suits your account list.

See our example below.

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Here's our example:
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Click OK.

Create an expense account

Go to the Accounts command centre and click Accounts List.
Click the Expense tab.
Click New. The Account Information window appears.
Enter an Account Number and Account Name which suits your account list.

See our example below.

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Here's our example:
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Click OK.

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title	2. Create a new

wages

wage category

Go to the Payroll command centre and click Payroll Categories.
On the Wages tab, click New. The Wages Information window appears.
Change the Wages Name field to Paid Parental Leave.
For the Type of Wages, select the Salary option.
Select the option to Override the Employees' Wage Expense Account.
In the Override Account field specify the

Expense account that you

expense account you created earlier.

See our example below.

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Click Employee to select the relevant employees as shown in the following example.

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Click OK.

Exempt Paid Parental Leave

Here's our example:
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Click Employee and select the employee(s) taking paid parental leave. Here's our example:
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Click OK.

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title	3. Exempt paid parental leave from calculating superannuation

Go to the Payroll command centre and click Payroll Categories.
Click the Superannuation tab.
Click the zoom arrow next to your superannuation category.
Click Exempt.
Select the Paid Parental Leave wage category to exempt from the superannuation calculation.
Click OK.

Exempt Paid Parental Leave

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title	4. Exempt paid parental leave from accruing entitlements

Hourly employees

For hourly employees the entitlement will not accrue as there are no hours to calculate the percentage. This seems contradictory, but normally hourly employees will accrue leave as a percentage of hours worked. While they are on Paid Parental Leave, they are being paid via a Salary Wage category, rather than an Hourly Wage category. Therefore having no hours on the paycheque means that no leave will accrue.

Salary Employees

Salary employees will need to have the Entitlement(s) deselected in their card. This is because generally these employees will be set to accrue a flat amount of hours per Pay Period/Month/Year, and unless the entitlement is deselected in their card, the entitlement will continue accruing throughout the period of their Paid Parental Leave.

To deselect the Entitlement(s):

Go to the Card File command centre and click Cards List.
Click the Employee tab.
Click the zoom arrow next to the relevant employee.
Click the Payroll Details tab and choose Entitlements.
Deselect any entitlements that should not be calculated during the Paid Parental Leave period.

Note:

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type note
When the employee finishes the

Paid Parental Leave you will

paid parental leave you'll need to select these entitlements again so that the leave entitlements will accrue.

While the employee

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title	5. While the employee is taking paid parental leave

Go to the Card File command centre and click Cards List.
Click the zoom arrow next to

the applicable employee

the employee taking paid parental leave.
Click the Payroll Details tab.
Click the Standard Pay option from the left-hand side.
Set all wage category amounts (except the Paid Parental Leave category) to zero.
Set the Paid Parental Leave category to the amount that is to be paid each pay period.

See our example below.

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Here's our example:
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Click OK.
Repeat steps 2-7 for all other employees for whom parental leave is applicable.

You are now ready to process Paid Parental leave payments for your employees. When you have finished paying the paid parental leave payments, you can use the Reset to Original Amounts button on the Payroll Details tab of the employees card (as shown above) to restore the values back to the standard hours.

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title	6. Receive the payment from the government

When the employer receives a parental leave payment from the government, this needs to be recorded as a Receive Money transaction into the

Liability

liability account created above.

Go to the Banking command centre and click Receive Money. The Receive Money window is displayed.
Specify the Amount Received.
On the first line, specify the

Liability

liability account

(

created earlier

)

in the Acct

#

No. field.

In our example this is 2-1560 Parental Leave. See our example below.

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Here's our example:
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Click Record.

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title	7. When the employee returns to work

When an employee returns to work after parental leave, their card needs to be updated as follows:

Go to the Card File command centre and click Cards List.
Click the zoom arrow next to

the applicable employee

the employee.
Click the Payroll Details tab.
Click the Standard Pay option from the left-hand side.
Click Reset to Original Amounts

as shown in the following example. Note in some software versions this button is located along the bottom of the window.

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. Here's our example:
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The Paid Parental Leave payment will be removed from the employee's standard pay, and their normal Base Salary will be reinstated.
Click OK.

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title	8. Record a clearing journal entry

Based on the setup described

in this support note

above, you

will

'll need to record a journal entry

(typically at the end of the financial year)

to move the parental leave funds from your software's liability account to the income account. This

will ensure the

typically occurs at the end of the financial year, and it ensures the funds are accounted for correctly in your business reports.

However,

this is based on the example setup described above, so

you should

speak

check with your accounting advisor or the ATO to determine your business reporting requirements in regard to parental leave payments.

To record the journal entry:

Go to the Accounts command centre and click Record Journal Entry. The Record Journal Entry window appears.
Select the Tax Inclusive option.
On the first line of the journal, debit the parental leave value from the liability account created earlier

(in our example this is 2-1560)

.
On the second line of the journal, credit the same parental leave value to the income account created earlier

(in our example this is 8-1560). See our example below.

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Click Record.

Paid parental leave and payment summariesWhen preparing ther

. Here's our example:
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Click Record.

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<h2><i class="fa fa-comments"></i>  FAQs</h2><br>

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title	How do I cater for paid parental leave on the employee's payment summary?

When preparing the employee's payment summary,

include the Paid Parental Leave wage category (created earlier) with the

the paid parental leave wage category would typically be selected under Gross Payments. For

more information on how to handle parental leave on

clarification on payment summaries

, speak to

for your employees, seek advice from your accounting advisor or the ATO.

We also have a support note which guides you through Preparing and printing Payment Summaries.

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Setting up accounts

Creating payroll categories

Receiving money

Processing payroll

Prepare payment summaries

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Key

ANSWER ID:33014

Receive the payment from the government

When the employee returns to work

Record a clearing journal entry

Create a liability account

Create an income account

Create an expense account

Hourly employees

Salary Employees

To deselect the Entitlement(s):

To record the journal entry:

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