Employee Resignation and Termination notification to ATO

[MV-8]

Hi There,

We had a staff who resigned and I have just processed his final pay and unused annual leave.

For the unused annual leave, I believe the tax has to be calculated marginally and will be reflected as part of the gross wages (he only had equivalent to 3 days unused annual leave). Is that correct?

Also, as there's no ETP, do I still need to report to the ATO for the employment termination via Payroll Reporting Centre?

Thanks in advance.

[Tracey_H · Accepted solution]

Hi @MV-8 

Thanks for your post. Generally speaking if the unused annual leave isn't an ETP you would use the calculation method in this link to calculate the PAYG withholding amount: ATO website - Withtholding from unused leave payments on termination

You will need to create payroll categories for unused leave payments, this help article has step-by-step instructions for that: Create payroll categories for termination payments

If you're not sure about the ATO reporting category to select for the unused leave category, these links may help otherwise I'd recommend checking with the ATO or your accountant:

Assign ATO reporting categories for STP

ATO website - Gross payments

ATO website - What you need to report STP

The termination pay will be reported to the ATO according to the ATO reporting category you select for the unused leave category. For example, if the payment needs to be included in gross wages, you would select Gross wages as the ATO reporting category and that amount will then be included in the gross wages total in the STP reports.

You will then need to terminate the employee in the Employee termination tab in the Payroll reporting centre:

Terminate an employee in STP

Please let me know if you need further help.

If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.