Make a termination payment (Australia)When an employee finishes working for you, you need to pay them the balance of the annual leave they’ve accrued but not yet used. You don’t need to pay them for unused personal leave, such as sick leave. If the employee is also owed regular pay up to their termination date, process this as a separate pay - it makes it easier to identify the different components of the final pay. Tax on final payTax on a final pay can get complicated, and our example below is a simple one. Seek advice from your accounting advisor or the ATO for help with your specific final pay needs. This help article on the ATO website is a good place to start. OK, let's step you through everything you need to do for a final pay. UI Expand |
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title | 1. Reset the employee's leave accrual |
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| Make sure you've paid the employee any regular pay owed up until their termination date. You can then change the employee's leave accrual setup so they don't accrue leave on their unused leave payout. - Go to the Payroll menu and choose Employees.
- Click the employee's name.
- Click the Leave tab.
- Under Annual leave, change the Annual entitlement to 0.00 (regardless of whether the leave is based on weeks or hrs/year).
- Click Save.
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| You can now pay the employee their unused leave - here's how: - Go to the Payroll menu and choose Enter pay.
- Specify the pay period and select the employee.
- Click Start pay run.
- Ensure the Normal Hours is zero.
- Enter their available annual leave balance (shown next to the annual leave description) into the annual leave Hours field.
- Ensure any superannuation amounts are removed as super is not accrued on unused leave.
- If required, click into the PAYG field and change the amount (this ATO article might help).
- Finish processing the pay as normal.
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title | 3. Deactivate the employee and record their finish date |
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| And finallyYou're almost done... - Go to the Payroll menu and choose Employees.
- Click the employee's name.
- Enter a Finish date and deselect the Active employee option.
- Click Save.
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title | 4. Report the termination to the ATO |
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| One last thing to do: If you've been reporting payroll information to the ATO via Single Touch Payroll, you'll need to notify the ATO of the termination. If you're not set up for STP, you'll need to provide the employee with a PAYG payment summary. |
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