Enhancements to ETP Type O payments in KeyPay
An Employment Termination Payment (ETP) is a payment received by an employee because their employment was terminated. Whether an employee receives an ETP depends on what the termination pay is made up of, and whether any of those payment types fall into the ETP classification.
What is defined as an ETP?
- You can work out which payments to include in the employee’s ETP by checking the ATO website.
- ETPs are broken down into codes and treated differently for tax purposes. A description of each ETP code can be found here.
Improvements to ETP Type O payments
As per the ETP code list, examples of ETP Type O payments could be golden handshake, gratuity, payment in lieu of notice, payment for unused sick leave, or payment for unused rostered days off.
KeyPay has significantly improved how ETP Type O payments are processed in the pay run, including:
- Selecting whether the payment is superable, whereby the system will then automatically calculate the SG component, and
- Automatically classifying unused leave paid out as ‘Type O’, and taxing it according to the ATO’s ETP guidelines.
These enhancements will be available from 17 March 2020, and will:
- Ensure compliance when it comes to processing Type O ETPs as part of termination pay;
- Improve the automation of classifying ETPs to remove manual errors;
- Ensure that if a user is unfamiliar with the complicated topic of ETPs, they won’t have to worry, because KeyPay will correctly classify and calculate it for them without their intervention.
For more details on how these improvements will work in practice, check out our support article.