The steps below describe how to create three new accounts to track your parental Leave:

• a liability account
• an income account
• an expense account

Create a liability account

1. Go to the Accounts command centre and click Accounts List.
2. Click the Liability tab.
3. Click New. The Account Information window appears.
4. Enter an Account Number and Account Name which suits your account list.
   Here's our example:
   
5. Click OK.

Create an income account

1. Go to the Accounts command centre and click Accounts List.
2. Click the Other Income tab.
3. Click New. The Account Information window appears.
4. Enter an Account Number and Account Name which suits your account list.
   Here's our example:
   
5. Click OK.

Create an expense account

1. Go to the Accounts command centre and click Accounts List.
2. Click the Expense tab.
3. Click New. The Account Information window appears.
4. Enter an Account Number and Account Name which suits your account list.
   Here's our example:
   
5. Click OK.

1. Go to the Payroll command centre and click Payroll Categories.
2. On the Wages tab, click New. The Wages Information window appears.
3. Change the Wages Name field to Paid Parental Leave.
4. For the Type of Wages, select the Salary option.
5. Select the option to Override the Employees' Wage Expense Account.
6. In the Override Account field specify the expense account you created earlier.
   Here's our example:
   
7. Click Employee and select the employee(s) taking paid parental leave.
   Here's our example:
   
8. Click OK.

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

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):

1. Go to the Card File command centre and click Cards List.
2. Click the Employee tab.
3. Click the zoom arrow next to the relevant employee.

4. Click the Payroll Details tab and choose Entitlements.

5. Deselect any entitlements that should not be calculated during the Paid Parental Leave period.

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

1. Go to the Card File command centre and click Cards List.
2. Click the zoom arrow next to the employee taking paid parental leave.
3. Click the Payroll Details tab.
4. Click the Standard Pay option from the left-hand side.
5. Set all wage category amounts (except the Paid Parental Leave category) to zero.
6. Set the Paid Parental Leave category to the amount that is to be paid each pay period.
   Here's our example:
   
7. Click OK.
8. Repeat steps 2-7 for all other employees for whom parental leave is applicable.

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

1. Go to the Banking command centre and click Receive Money. The Receive Money window is displayed.
2. Specify the Amount Received.
3. On the first line, specify the liability account created earlier in the Acct No. field.
   Here's our example:
   
4. Click Record.

1. Go to the Card File command centre and click Cards List.
2. Click the zoom arrow next to the employee.
3. Click the Payroll Details tab.
4. Click the Standard Pay option from the left-hand side.
5. Click Reset to Original Amounts.
   Here's our example:
   
   The Paid Parental Leave payment will be removed from the employee's standard pay, and their normal Base Salary will be reinstated.
6. Click OK.

Based on the setup described above, you'll need to record a journal entry to move the parental leave funds from your software's liability account to the income account. This typically occurs at the end of the financial year, and it ensures the funds are accounted for correctly in your business reports.

However, you should 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:

1. Go to the Accounts command centre and click Record Journal Entry. The Record Journal Entry window appears.
2. Select the Tax Inclusive option.
3. On the first line of the journal, debit the parental leave value from the liability account created earlier.
4. On the second line of the journal, credit the same parental leave value to the income account created earlier.
   Here's our example:
   
5. Click Record.

When preparing the employee's payment summary, the paid parental leave wage category would typically be selected under Gross Payments. For clarification on payment summaries for your employees, seek advice from your accounting advisor or the ATO.