Termination - Employment Termination Payment (ETP)
ETP is any payment made 'in consequence of the termination of a person's employment that is received no later than 12 months after the termination', other than certain specified payments. An ETP can be a:
- Life Benefit – received by the person whose employment is terminated
- Death Benefit – received by another person after the death of a person whose employment is terminated (voluntarily reported via STP)
The following are payments which can be included in an ETP:
- Ex-gratia, gratuity or golden handshake – a voluntary payment made by the employer that has no legal obligation to do so.
- Taxable component of a Severance payment – only for a genuine bona-fide redundancy or approved early retirement scheme (AERS).
- Non-Genuine redundancy Severance payment – if the employee is dismissed from their employment for reasons other than that their job is no longer required to be performed or has reached their pension age or earlier age of mandatory retirement.
- Payment in lieu of notice (PILON) – for amounts not included in the tax-free component of a severance payment for redundancy or approved early retirement schemes.
- RDOs – the remaining unused balance of rostered days off.
- TOIL – the remaining unused balance of time off in lieu.
- Personal leave – the remaining unused balance of personal leave.
- Compensation – other amounts that are intended to compensate for the loss of (job, future earnings (invalidity), future super payments, future benefits, or future indirect income (death benefit)).
- Wrongful dismissal – compensation typically directed through judicial finding
The following are payments which should NOT be included in an ETP:
- Unused leave on termination – annual leave, annual leave loading, long service leave, long service leave loading
- Tax free component of a Severance payment – only for a genuine bona-fide redundancy or approved early retirement scheme, as defined in Part 2-2 of the Fair Work Act 2009 or other industrial instruments, up to the tax free threshold
- Salary or wages - outstanding salary, wages, allowances, bonuses or commissions, overtime and other payments owing for work already performed or leave already taken
- Superannuation benefits – lump sum or income stream (pension or annuity) from a super fund
- Foreign Employment Income – where service was performed in a foreign country as a foreign tax resident or as an Australian tax resident for exempt foreign income
- Restraint of trade payments – contractual capital payment that compensates for restriction of other rights
- Compensation for injury – a capital payment for personal injury in connection with a loss of earning capacity
- Employee share scheme (ESS) – discounts on shares, rights and stapled securities acquired by the employee under an ESS
- Advance or loan – on arms-length terms and conditions
Adding an ETP Payment
Follow the next steps to create an ETP payment:
The termination flag must be set and a valid termination reason must be selected, you can find the termination options under the employee's payroll details.
- Access the ETP - Leave from the application toolbar
- Click New ETP
- The ETP window appears
- Employee select the employee "terminated employment"
- Termination Date & Reason pre-filled based on the selected employee
- Payment Type select the ETP payment type
- Available Leave Hours available for some payment type such personal leave and RDOs
- Taxable Amount enter the ETP taxable amount
- Taxable Free Amount enter the ETP tax free amount if applicable
- Tax Withheld auto calculated but can be adjusted if needed
- Payment Code select the ETP payment code
- Payment Date select the date of payment
- Click Save
If there are mulitple ETP payment codes, then you should create one ETP for each payment code