Employee has Annual leave , leave loading, and LSL to Payout.
So, when we terminate employee how should we calculate Tax?
The Final PAYG Tax calculates only the Annual leave when we click Terminate employee from employee record.
Do we edit Final PAYG and correct the tax including (annual leave, leave loading and LSL) ?
If you are doing the termination pay out via the Terminate Employee button/Termination pay run then the system will work out the persons marginal rate of tax on all the leave types using the last standard pays wages. If the reason is a Redundancy then that changes how the tax is calculated on leave, it should be a flat 32% Lump Sum A calculation. Our advanced payroll does this all automatically however the basic JCurve version does not. You will have to change the leave payout codes to reflect the leave payout redundancy code, please see the Info pasted below.
The employee also have 1 week of notice period and redundancy payout, do we include tax for those payment . Should we use Bona- fida redundancy (tax) components or we can just use ETP in liue?
If the Redundancy payout is the tax free one then theres no Tax to work out, please use Bona Fide Redundancy codes for redundancy payout. With the ETP In Lieu of notice if its to be taxed then use the relevant code, once again the advanced payroll does the tax automatically but the JCurve needs the ETP Tax Withheld line added in manually and tax calculated manually.
So just like with a normal termination you have to make sure that the persons final normal time hours worked have been paid out in either a standard or adjustment run.
Then start the termination pay run as normal and submit the first screen.
The system will then process the payslip and you will see the payslip detail screen displaying the leave accrual being paid out and the PAYG on that.
You will need to Edit the Annual Leave Accrual line/s and change the sub type code to Annual Leave Payout (Redundancy), this will ensure that this payment will appear in the Lump Sum A field of the payment summary. If you are paying out Leave Loading or Long Service Leave you will also need to edit those lines and select the applicable leave redundancy code.
The other thing you need to do is manually calculate the tax on the leave accrual, the system would have calculated the marginal rate of tax which is correct when it comes to a normal termination but because this is a redundancy, the Lump Sum A tax is 32%, so you need to work that out and Edit the PAYG line to reflect that.
The next thing you need to do is click on the Manually Add Detail button and add in what you want to pay for the redundancy. There are Bona Fide Redundancy codes for you to use (if you have not done a redundancy before then these codes may be marked as inactive so you need to go into your Pay Component Sub Type List screen (via payroll admin tab > payroll setup) and Edit the code and untick the Inactive box and Save) and also ETP codes, it all depends on what you are paying and if there is tax on anything etc.
If you have tax to be paid on an ETP then you need to use the ETP Tax Withheld code for that portion of tax, you will need to calculate that manually as well as per the ATO legislation, the termination process currently does not do any automated tax calculations on anything other than on a normal terminations leave accrual.
Once you have entered/edited what you need you will then need to Re-Calculate the payslip, when you are on the Re-Calculate screen you will need to untick the Re-Process Tax box so that the system does not change the entries you have made.