Reporting of paid leave under STP Phase 2

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 what the reporting rules for paid leave are and how you can prepare for changes that are coming in FastTrack360 to facilitate the new requirements.

What are the requirements for reporting paid leave under STP Phase 2?

Under STP Phase 2 paid leave can be required to be reported under any of 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:

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 grated by an employer in response to specific circumstances.
Paid leave type C - applies to certain leave types when cashed 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 certain leave types when cashed out during service.

In addition to the above, existing reporting obligations require some leave types to 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. These rules remain unchanged under STP Phase 2.

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 will FastTrack360 recognise the type of leave being paid?

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.

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.

What are the specific payment/reporting rules for each leave type?

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 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.

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.

The process for making each type of leave payment in FastTrack360 will not change and is provided for context only.

Annual Leave

Leave Taken

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be reported as Paid Leave - Type O
Cash Out of Leave in Service
Triggered manually at the Leave Payments pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Payout to facilitate cashing out the leave balance at the Leave Payments pay batch stage and the pay code referenced by the deduction rules must have a pay code type of Leave.	Must be reported as Paid Leave - Type C
Payout at Termination of Employment
Manually triggered as payment type of Gross at Termination pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage.	Must be reported as Paid Leave - Type U
Manually Triggered as payment type Lump Sum A - Type R at Termination Pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage.	Must be reported as Lump Sum A (Type R).
Manually Triggered as payment type Lump Sum A - Type T at Termination Pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage.	Must be reported as Lump Sum A (Type T).

Annual Leave Loading

Leave Taken

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
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: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage and the leave deduction rules must have a leave loading percentage defined.	Must be 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.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Payout to facilitate cashing out the leave balance at the Leave Payments pay batch stage and the leave deduction rules must have a leave loading percentage defined. The loading pay codes on the leave deduction rules for Payout must be of one of the following pay code types: Overtime - this pay code type must be used to pay the cash out of the loading if the applicable award/agreement stipulates that the loading is in compensation for the loss of opportunity to work overtime. Leave - this pay code type must be used to pay the cash out of the loading if the loading is not in compensation for the loss of opportunity to work overtime.	If paid against pay code type of Overtime, must be reported as Overtime. Otherwise, must be reported as Paid Leave - Type C
Payout at Termination of Employment
Manually triggered as payment type of Gross at Termination pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage and the leave deduction rules must have a leave loading percentage defined.	Must be reported as Paid Leave - Type U
Manually Triggered as payment type Lump Sum A - Type R at Termination Pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage and the leave deduction rules must have a leave loading percentage defined.	Must be reported as Lump Sum A (Type R).
Manually Triggered as payment type Lump Sum A - Type T at Termination Pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage and the leave deduction rules must have a leave loading percentage defined.	Must be reported as Lump Sum A (Type T).

Personal/Carers' Leave

Leave Taken

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be reported as Paid Leave - Type O
Cash Out of Leave in Service
Triggered manually at the Leave Payments pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Payout to facilitate cashing out the leave balance at the Leave Payments pay batch stage (if applicable) and the pay code referenced by the deduction rules must have a pay code type of Leave.	Must be 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.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes.	Must be reported as ETP

Rostered Day Off (RDO) Leave

Leave Taken

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be reported as Paid Leave - Type O
Cash Out of Leave in Service
Triggered manually at the Leave Payments pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Payout to facilitate cashing out the leave balance at the Leave Payments pay batch stage and the pay code referenced by the deduction rules must have a pay code type of Leave.	Must be reported as Paid Leave - Type C
Payout at Termination of Employment
Must be manually included in the ETP amount.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes.	Must be reported as ETP

Time Off In Lieu (TOIL) Leave

Leave Taken

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be reported as Paid Leave - Type O
Cash Out of Leave in Service
Triggered manually at the Leave Payments pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Payout to facilitate cashing out the leave balance at the Leave Payments pay batch stage and the pay code referenced by the deduction rules must have a pay code type of Overtime.	Must be reported as Overtime.
Payout at Termination of Employment
Must be manually included in the ETP amount.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes.	Must be reported as ETP

Compassionate/Bereavement Leave, Study Leave, Family & Domestic Violence Leave, Employer Special Circumstances Leave

Leave Taken

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be 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

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to P - Parental to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be 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

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to W - Workers' Comp to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be 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

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to A - Ancillary to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be 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

Leave Taken
How It's Paid in FastTrack360 Pay Module	Leave Configuration Required in FastTrack360	STP Reporting Rules
Paid automatically at the Leave Payments pay batch stage based on either of the following: an approved leave request linked to the leave type an absence item, linked to the leave type, on an approved timesheet.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Leave Taken to facilitate automatic payment at the Leave Payments pay batch stage.	Must be reported as Paid Leave - Type O
Cash Out of Leave in Service
Triggered manually at the Leave Payments pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Payout to facilitate cashing out the leave balance at the Leave Payments pay batch stage.	Must be reported as Paid Leave - Type C
Payout at Termination of Employment
Manually triggered as payment type of Gross at Termination pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage.	Must be reported as Paid Leave - Type U
Manually Triggered as payment type Lump Sum A - Type R at Termination Pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage.	Must be reported as Lump Sum A (Type R)
Manually Triggered as payment type Lump Sum A - Type T at Termination Pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage.	Must be reported as Lump Sum A (Type T)
Manually triggered as payment type of Lump Sum B at Termination pay batch stage.	Paid Leave Type in leave type record header must be set to O - Other to identify the leave type that is being paid for STP reporting purposes. Leave type must have deduction rule(s) for Termination to facilitate paying out the leave balance at the Termination pay batch stage.	Must be reported as Lump Sum B

What can you do to prepare?

You can start doing the following now to prepare for reporting of leave payments under STP Phase 2:

If you have not done so already, map your existing leave types to the relevant, corresponding ATO paid leave type (P, W, A, O). Note that functionality was introduced in the v12.10 Patch 3 release to allow you to perform that mapping. For more information, see Identifying Paid Leave Types.
If you pay annual leave loading, check the configuration of the leave type to ensure that the leave loading pay code for Payout deduction rules, which are used when cashing out leave during service, has a pay code type of Overtime, if the leave loading compensates for the opportunity to work overtime. Otherwise, if the leave loading does not compensate for the loss of opportunity to work overtime, ensure the leave loading pay code type is Leave.
If you pay TOIL leave, check that the configuration of the leave type to ensure that the leave loading pay code for Payout deduction rules, which are used when cashing out leave during service, has a pay code type of Overtime.

If you have any questions, please contact your FastTrack account manager or FastTrack Client Services.