STP Phase 2 introduces a greater level of granularity around reporting of payments. Paid leave is a particular area where there are complex rules around how a payment must be categorised for the purpose of reporting to the ATO.
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Under STP Phase 2 reporting requirements, payments made to Individual Non Business payees for leave taken, leave paid out during employment and leave paid out at termination of employment must be reported as year-to-date amounts that are disaggregated from other gross payments. The disaggregated amounts are reported under one of the following categories depending on the type of leave that is paid and the circumstances under which the payment is made:
Paid leave type P - applies to paid parental leave including Government Paid Parental Leave (GPPL) payments from Services Australia that are paid to the payee through payroll. Also applies to parental leave that is paid directly by the employer.
Paid leave type W - applies to Workers' compensation leave.
Paid leave type A - applies to ancillary leave such as leave taken for Australian Defense Force service, jury service, eligible community service, emergency service.
Paid leave type O - applies to all other leave types covered by the ruling SGR 2009/2 S32, 33, such as annual leave/annual leave loading, personal leave, rostered day off (RDO) leave, time off in lieu (TOIL), compassionate/bereavement leave, study leave and paid leave granted by an employer in response to specific circumstances.
Paid leave type C - applies to the following leave types when paid out during employment:
annual leave
annual leave loading (except where the applicable award/pay agreement stipulates that the leave loading is paid in compensation for loss of ability to work overtime)
personal/carers' leave
rostered day off (RDO)
long service leave.
Paid leave type U - applies to the following types of leave when paid out as a gross payment at termination of employment:
annual leave
annual leave loading
long service leave.
Overtime - applies to the following types of leave when paid out during service:
annual leave loading (only where the applicable award/pay agreement stipulates that the leave loading is paid in compensation for loss of ability to work overtime)
time off in lieu (TOIL).
In addition to the above, some leave types must be reported as a Lump Sum A, Lump Sum B or as part of an employment termination (ETP) payment when leave is paid out on termination of employment.
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At termination of employment, annual leave and annual leave loading … |
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The can also be paid out as part of a Lump Sum A payment, in which case the payment is reported under Lump Sum A and not Paid leave type U. Similarly, long service leave can be paid out as part of a Lump Sum A or Lump Sum B payment, in which case it is reported as such instead of Paid leave type U. |
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The disaggregated reporting of leave payments by type in STP applies to payees with a payee type/income type of Individual Non Business. For payees with a payee type/income type of Labour Hire, leave payments are reported as part of the payees' overall gross earnings amount rather than separately instead of being disaggregated by type. |
How does FastTrack360 recognise the type of leave being paid?
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Automatic payments for leave taken
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At the Leave Payments pay batch stage
The Paid Leave Type field in the header of the Leave > Maintenance > Leave Type > Edit Leave Type screen, which is highlighted in the example below, defines how a leave payment, which is linked to the leave type, will be classified in STP reporting when leave taken is paid automatically in a pay batch.
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For example, …
in the Payroll module, an automatic payment is triggered for leave taken, assuming all other conditions for paying the leave are met, if a payee has any of the following in the pay batch:
an approved leave request linked to the leave type
an absence item, linked to the leave type, on an approved timesheet.
Leave type maintenance in the FastTrack360 Leave module will be enhanced so that any To determine the disaggregated category under which payment is to be reported in STP, the system references the Paid Leave Type field on the leave type that is assigned to the country of Australia will feature the ability to select, in the header of the leave type record, the paid leave type (P, W, A or O) to which that leave type record corresponds.
In the Payroll module, when leave taken is paid or when the balance of leave is cashed out at the Leave Payment pay batch stage, or when the balance of leave is paid out as a gross payment at the Termination pay batch stage, FastTrack360 will be able to report the corresponding amount under the necessary category depending on the paid leave type that is flagged in the header of the corresponding leave type.
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For some leave types, the pay code type that is used to cash out leave in service will also determine how the payment is reported. For more information, see Annual Leave Loading and TOIL below. |
Leave paid out at the Termination pay batch stage as a Lump Sum A or Lump Sum B or as part of an ETP will continue to be reported as such, as per current functionality.linked to leave request or absence item, as highlighted in Figure 1 below.
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Figure 1: Leave > Maintenance > Leave Type > Edit Leave Type screen - Paid Leave Type field
For example, if the Paid Leave Type field on the leave type that is linked to leave request or absence item is set to Other Paid Leave (O), the amount that is paid for the leave taken is added to the year-to-date Paid Leave Type O amount that is reported in STP.
Manual payout of unused leave during employment
At the Leave Payments pay batch stage in the Payroll module, unused leave balances can be paid out by selecting the leave type to be paid out and manually triggering a payout action. As with automatic payments for leave taken, the system references the Paid Leave Type field on the corresponding leave type to determine how the payment is to be reported in STP.
However, the pay code type that is used to make the payment also determines how the payment is reported. That is because only those leave types that fall under the O category can be paid out during employment, in which case the payout amount is added to the year-to-date Paid Leave Type C (i.e. cash out in service) amount that is reported in STP. However, there are two exceptions as follows:
Time off in lieu (TOIL) - because this type of leave compensates for unpaid overtime, when an untaken leave balance is paid out during employment the payment must be reported as Overtime and not Paid Leave Type C.
Annual leave loading - under some awards, annual leave loading is an entitlement that is provided specifically to compensate for the loss of the ability to work overtime while on annual leave. Where that is the case, when an untaken annual leave loading balance is paid out during employment the payment must be reported as Overtime and not Paid Leave Type C.
Therefore, when the balance of a leave type is paid out at the Leave Payments pay batch stage, if the payment is made using a pay code type of:
Overtime - the payment amount is added to the year-to-date Overtime amount that is reported in STP
Leave - the payment amount is added to the year-to-date Paid Leave Type C amount that is reported in STP.
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The pay codes that are used to pay out the balance of leave and the balance of leave loading are defined in the Paycode and Leave Loading Paycode fields on the deduction rule for Payout on the corresponding leave type, as highlighted in Figure 2 below. Note that the Leave Loading Paycode field is available only if a leave loading percentage is defined on the deduction rule. |
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Figure 2: Leave > Maintenance > Leave Type > Edit Leave Type > Leave Set > Deduction Rule Entry screen - Paycode and Leave Loading Paycode fields.
Manual payout of unused leave on termination of employment
At the Termination pay batch stage in the Payroll module, unused leave balances can be manually triggered to be paid out as one of the following types of payment:
gross
Lump Sum A
Lump Sum B.
Only those leave types that fall under the O category can be paid out on termination of employment. Annual leave, annual leave loading and long service leave can be paid out as gross, in which case the payout amount is added to the year-to-date Paid Leave Type U (i.e. unused leave cashed out at termination) amount that is reported in STP.
Depending on the nature of the termination and when the leave was accrued, unused annual leave and annual leave loading may also be cashed out as part of a Lump Sum A payment, in which case payment is report as part of the Lump Sum Type A amount in STP and not as Paid Leave Type U.
Depending on the nature of the termination and when the leave was accrued, long service leave may also be paid as part of a Lump Sum A or Lump Sum B payment, in which case the payment is report as part of the Lump Sum Type A or B amount in STP respectively and not as Paid Leave Type U.
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Other leave types that fall under the O category, including rostered day off (RDO), time off in lieu (TOIL) and personal/carers' leave, can be paid on termination as part of the Employment Termination Payment (ETP) amount and where that is the case, the payment is reported as part of the Termination Payments > Payee Termination Payment Taxable Component amount in STP and not as Paid Leave Type U. |
Payment of leave & making leave payment adjustments using manual pay items
In some cases it may not be practical to set up a leave type to facilitate payment of leave. For example, for some low-occurrence leave types, such as those covered by paid leave categories P, W and A, it may be practical to pay instances of leave taken using manual pay items. There are also circumstances where manual pay items might be used to adjust an overpayment or an underpayment of leave.
To cater for both of the abovementioned scenarios, pay codes with …
What are the specific payment/reporting rules for each leave type?
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