Changes to employee termination payments made in the 2012/2013 financial year (Australia)
The ATO has made changes to the process of reporting Employee Termination Payments (ETPs), including the introduction of a new range of ETP codes. These changes have been retroactively applied by the ATO to the entire 2012 - 2013 payroll year, starting 1 July 2012.
The 2013.01 MYOB Exo Payroll compliance release contains a new utility that will convert any ETPs to the new format.
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What is an Employee Termination Payment?
Here's some more information about ETP payments to help determine if they apply to you. If you're still not sure if ETP payment types apply to your business in the 2012 - 13 financial year, seek advice from your accounting advisor or the ATO.
An ETP is a lump sum payment you make to an employee when they stop working for you.
An ETP may include:
- payment in lieu of notice
- a gratuity or 'golden handshake'
- compensation for the loss of a job
- compensation for wrongful dismissal, provided it is paid within 12 months of the actual termination of employment
- payments arising from your employee's termination because of ill health (invalidity), other than compensation for personal injury
- payments you made for genuine redundancy or under an early retirement scheme that exceed the tax-free part time
- unused rostered days off
- unused sick leave
- certain payments after the death of an employee.
An ETP does not include:
- payments for unused annual leave or leave loading
- payments for unused long service leave
- salary, wages, allowances, bonuses and incentives you owe the employee for work done or leave already taken
- compensation for personal injury
- payment for restraint of trade
- foreign termination payments
- employee share scheme payments
- an advance or loan
- payments you made for genuine redundancy or under an early retirement scheme that are within the tax-free limit.
Running the ETP financial year 2012/2013 update utility
If the 2013.01 MYOB Exo Payroll compliance release has been installed, a new utility is available to convert existing ETPs to the new Payment Summary format. The utility can be run when creating the electronic file for sending to the ATO or manually following the steps below.
- Open the new utility by selecting ETP FY 12/13 Update from the Utilities menu.
Each termination processed in the 2012 - 2013 financial year under the old system is shown in the screen, based on the selection in the Employment Termination Payment field. Those ETPs still to be converted to the new format will be highlighted in red. Select an ETP then click on the Edit button to open the window where the changes to the new format can be processed.
If there have been no ETPs recorded for the 2012-2013 financial year then the screen will be empty.
- This window is a combination of the old and new ETP windows from the Termination Wizard. Enter the required details for the termination then click Save to return to the main ETP Update screen. The values and codes to enter for each record can be determined by using the Employment Termination Payment Calculator tool on the ATO website.
- Repeat the above steps for each ETP item to be processed.
- Once all ETPs have been updated to the new format, click on the Exit button to exit the ETP Update utility.
New ETP codes
New ETP codes describe the reason for the termination payment.
We advise that the Employment Termination Payment Calculator tool on the ATO website be used to determine which codes to enter into MYOB Exo Payroll. The following codes are used in MYOB Exo Payroll:
- R – payment made due to retirement, genuine redundancy, invalidity or compensation for personal injury,
- unfair dismissal, harassment or discrimination.
- O – payment for reason not covered by R, e.g. voluntary redundancy, non-genuine redundancy, golden handshake, gratuity, payment in lieu of notice, payment for unused sick leave, payment for unused rostered days off.
- D – a death benefit ETP paid to a dependant of the deceased.
- N – a death benefit ETP paid to a non-dependant of the deceased.
- T – a death benefit ETP paid to a trustee of the deceased's estate.
The following codes are not used in MYOB Exo Payroll as the system supports ETPs in the current year only:
- S - a code R payment where payment for same termination was made in a previous income year.
- P - a code O payment where payment for same termination was made in a previous income year.
- B - a death benefit ETP paid to a non-dependant of the deceased and a termination payment was made to the non-dependant in a previous income year for the same termination.
The ATO has also introduced a new Cap method: the “whole of income” cap is an additional $180,000 non-indexed cap that is based on the employee’s yearly taxable income. The new ETP screen also specifies the ETP cap method for each payment using the new CAP field. The “whole of income” cap applies only to ETP records where the ETP code is “O”—in these cases, use the lower of the existing ETP cap and the “whole of income” cap.
Need more help? You can open the online help by pressing F1 on your keyboard while in your software.
You can also find more help resources on the MYOB Exo Employer Services Education Centre for Australia or New Zealand.