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.
In this article we will look at the STP reporting rules for paid leave and how you should configure FastTrack360 to ensure that you comply with the rules.
What are the requirements for reporting paid leave under STP Phase 2?
Under STP Phase 2 paid leave is required to be reported under the following categories depending on the type of leave being paid and whether the leave is paid when taken, cashed out during service or paid out on termination of employment:
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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:
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 grated granted by an employer in response to specific circumstances.
Paid leave type C - applies to certain the following leave types when cashed paid out during service.
Paid leave type U - applies to certain types of leave when paid out as gross at termination of employment.
Overtime - applies to the following types of leave when cashed out during service:employment:
annual leave
annual leave loading (only except 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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The reporting of leave payments by type 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 by type. |
How does FastTrack360 recognise the type of leave being paid?
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, …
Leave type maintenance in the FastTrack360 Leave module will be enhanced so that any 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.
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personal/carers' leave (only where specifically allowable under the award/agreement)
rostered day off (RDO)
long service leave.
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).
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At termination of employment, annual leave and annual leave loading 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 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 instead of being disaggregated by type. |
How does FastTrack360 recognise the type of leave being paid?
Automatic payments for leave taken
At the Leave Payments pay batch stage 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.
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 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 such scenarios, a STP Paid Leave Type field is available on Pay Code where the pay code type is Leave, as shown on Figure 3 below.
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The STP Paid Leave Type field on the pay code allows the corresponding STP leave type reporting category to be assigned (P, W, A, O) so that if the pay code is used for a manual pay item, in the Interpreter or in a pay batch, the payment or adjustment can be reported against the corresponding paid leave category in STP reporting. For example, if the Other Paid Leave (O) option is selected, manual payments/adjustments made using the pay code will affect the year-to-date Paid Leave Type O amount that is reported in STP.
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If a leave payment is linked to an absence item on an approved timesheet or an approved leave request, the system will reference the leave category that is selected in the header of the Leave Type, as highlighted in Figure 1, to determine how to report the payment irrespective of whether an option is selected in the STP Paid Leave Type field on the leave pay code itself. |
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If the payment is not linked to an absence item on a timesheet or a leave request and no option is selected in the STP Paid Leave Type field on the leave pay code, the payment will not be reported as paid leave in STP but instead it will be reported under general gross earnings, which means the payment might be misclassified. |
Configuration of Leave Types
The sections below describe in detail how each type of paid leave is required to be reported under STP Phase 2 depending on whether the leave is paid when taken, paid when cashed out in service or paid when paid out on termination of employment. In each case, the leave configuration that is required leave should be configured in FastTrack360 to ensure that the leave payments are reported correctly is identified as is the process for making each type of leave payment in FastTrack360.
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With the exception of the ability to identify the paid leave type in the header of a leave type record, which is functionality that will be added to a future release of FastTrack360 in advance of the commencement of STP Phase 2 reporting, most of the leave types that have configured in your system may already adhere to the configuration that is required for each leave type to facilitate correct reporting under STP Phase 2. However, it is recommended that you check your current configuration against what is described below to ensure that leave payments will be reported as required.
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for leave taken, for leave paid out during service and for leave paid out at termination of employment can be reported in STP in accordance with ATO requirements.
In each case, the leave configuration that is required in FastTrack360 to ensure that the leave payments are reported correctly is identified as is the process for making each type of leave payment in FastTrack360
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Annual Leave
Leave Taken | ||||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? | ||
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type O | ||
Cash Out of Leave in Service | ||||
Triggered manually at the Leave Payments pay batch stage. |
| Must be reported Reported as Paid Leave - Type C | ||
Payout at Termination of Employment | ||||
Manually triggered as payment type of Gross at Termination pay batch stage.
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| Must be reported Reported as Paid Leave - Type U | ||
Manually Triggered as payment type Lump Sum A - Type R at Termination Pay batch stage.
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| Must be reported Reported as Lump Sum A (Type R). | ||
Manually Triggered as payment type Lump Sum A - Type T at Termination Pay batch stage.
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| Must be reported Reported as Lump Sum A (Type T). | ||
Annual Leave Loading
Leave Taken | ||||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? | ||
Paid automatically at the Leave Payments pay batch stage when annual leave is paid, if annual leave is configured with a leave loading, based on either of the following:
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| Reported as Paid Leave - Type O | ||
Cash Out of Leave in Service | ||||
Triggered automatically when a cash out of annual leave is manually triggered at the Leave Payments pay batch stage. |
| If paid against pay code type of Overtime, must be is reported as Overtime. Otherwise, must be is reported as Paid Leave - Type C | ||
Payout at Termination of Employment | ||||
Manually triggered as payment type of Gross at Termination pay batch stage.
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| Reported as Paid Leave - Type U | ||
Manually Triggered as payment type Lump Sum A - Type R at Termination Pay batch stage.
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| Reported as Lump Sum A (Type R). | ||
Manually Triggered as payment type Lump Sum A - Type T at Termination Pay batch stage.
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| Reported as Lump Sum A (Type T). | ||
Personal/Carers' Leave
Leave Taken | ||||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? | ||
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type O | ||
Cash Out of Leave in Service | ||||
Triggered manually at the Leave Payments pay batch stage.
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| Must be reported Reported as Paid Leave - Type C | ||
Payout at Termination of Employment | ||||
Must be manually added to the ETP amount at the Termination pay batch stage. |
| Must be reported as ETP | ||
Rostered Day Off (RDO) Leave
Leave Taken | ||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? |
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type O |
Cash Out of Leave in Service | ||
Triggered manually at the Leave Payments pay batch stage. |
| Must be reported Reported as Paid Leave - Type C |
Payout at Termination of Employment | ||
Must be manually included in the ETP amount. |
| Must be reported Reported as ETP |
Time Off In Lieu (TOIL) Leave
Leave Taken | ||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? |
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type O |
Cash Out of Leave in Service | ||
Triggered manually at the Leave Payments pay batch stage. |
| Must be reported Reported as Overtime. |
Payout at Termination of Employment | ||
Must be manually included in the ETP amount. |
| Must be reported Reported as ETP |
Compassionate/Bereavement Leave, Study Leave, Employer Special Circumstances Leave
Leave Taken | ||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? |
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type O |
Cash Out of Leave in Service | ||
N/A - these leave types cannot be cashed out in service. | ||
Payout at Termination of Employment | ||
N/A - these leave types cannot be paid out on termination of employment. | ||
Paid Parental Leave
Leave Taken | ||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? |
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type P |
Cash Out of Leave in Service | ||
N/A - this leave type cannot be cashed out in service. | ||
Payout at Termination of Employment | ||
N/A - this leave type cannot be paid out on termination of employment. | ||
Workers' Compensation Leave
Leave Taken | ||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? |
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type W |
Cash Out of Leave in Service | ||
N/A - this leave type cannot be cashed out in service. | ||
Payout at Termination of Employment | ||
N/A - this leave type cannot be paid out on termination of employment. | ||
Defense Force Leave, Jury Duty Leave, Community Service Leave (SES ,CFA etc.)
Leave Taken | ||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360STP Reporting Rulesin FastTrack360 | How Does FastTrack360 Report the Payment in STP? |
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type A |
Cash Out of Leave in Service | ||
N/A - these leave types cannot be cashed out in service. | ||
Payout at Termination of Employment | ||
N/A - these leave types cannot be paid out on termination of employment. | ||
Long Service Leave
Leave Taken | ||||
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How It's Paid in FastTrack360 Pay Module | Leave Configuration Required in FastTrack360 | STP Reporting RulesHow Does FastTrack360 Report the Payment in STP? | ||
Paid automatically at the Leave Payments pay batch stage based on either of the following:
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| Must be reported Reported as Paid Leave - Type O | ||
Cash Out of Leave in Service | ||||
Triggered manually at the Leave Payments pay batch stage. |
| Reported as Paid Leave - Type C | ||
Payout at Termination of Employment | ||||
Manually triggered as payment type of Gross at Termination pay batch stage.
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| Must be reported as Paid Leave - Type U | ||
Manually Triggered as payment type Lump Sum A - Type R at Termination Pay batch stage.
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| Must be reported as Lump Sum A (Type R) | ||
Manually Triggered as payment type Lump Sum A - Type T at Termination Pay batch stage.
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| Must be reported as Lump Sum A (Type T) | ||
Manually triggered as payment type of Lump Sum B at Termination pay batch stage.
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| Must be reported as Lump Sum B | ||