This article will explain the difference between Lump Sum A Codes & Income Type Codes as well as the ATO reporting rules regarding each Code.
Individual Non-Business - R Or T Codes For Lump Sum A
When an employee has been paid an amount that qualifies as Lump Sum A, you may see the Code R or T displayed next to it on the payment summary, if you produce them.
|
Code |
Description |
|
R |
The payment was due to a genuine redundancy, invalidity or early retirement scheme. |
|
T |
The payment was made for any other reason than the ones mentioned above. |
Individual Non-Business ATO Payment Summary - Income Type Code
These are not seen within the STP Update screen used at the end of the year to mark Final Pays.
The Type box displayed on optional ATO payment summaries displays one of the following Codes, based on the employee's income type.
|
Code |
Description |
|
S |
This code is displayed for all employees that are not attached to the working holiday maker tax table. |
|
H |
The employee is a working holiday maker. The working holiday maker tax table is selected in the employee file for this Code to be displayed on the payment summary. |
These Codes are not displayed in the STP Update screen. Instead, there is a field labelled WHM displayed as a tick box indicating that the employee was a working holiday maker.
What Do The Lump Sum Fields In The ATO Payment Screen Mean?
|
Lump Sum Codes |
Lump Sum Description |
|
Lump Sum A |
For unused long service leave that accrued after 15 August 1978 but before 18 August 1993; or for unused holiday pay and other leave related payments that accrued before 18 August 1993; or for unused long service leave accrued after 15 August 1978, or unused holiday pay or related payments, where the amount was paid because you ceased employment under an approved early retirement scheme, because of invalidity or because of bona fide redundancy. This entire amount is taxable, but the maximum rate of tax is 30% plus the applicable Medicare levy rate. |
|
Lump Sum B |
For unused long service leave which accrued before 16 August 1978. Average marginal rate on 5% of the amount. |
|
Lump Sum D |
A tax-free bona fide redundancy payment or approved early retirement scheme payment. This amount is not taxable and should not be included in your income tax return. |
|
Employment Termination Payments (ETP) |
Cash lump sum on termination of employment. If you produce the optional ATO payment summaries, an extra one called labelled Employment Termination Payment will be produced for terminated employees with qualifying pay components. ETP type Codes have been discussed below in detail. |
|
Lump Sum E or Lump Sum payment in arrears |
For back payment, exceeding $400, which accrued more than 12 months ago. This entire amount is taxable, but a tax rebate (also known as a tax offset) may be available. |
Reporting Rules For A Lump Sum E payment
Lump sum payments in arrears that are equal to or greater than $400.00 must be STP reported as label Lump Sum E. You must also provide the employee with a letter that details over which financial years the amount was accrued and the gross amount which accrued over those years.
Where the lump sum payment is less than $400.00, the gross amount should be included against the Gross in STP Reporting. No explanatory letter to the employee is required in this instance.
What Is Wagemaster Referencing In The Employment Termination Payment Screen?
The below table will help you decide if any part of an employment termination payment has resulted in Wagemaster referencing it in the ETP screen. Due to the nature of the termination, these payments can be taxed differently (excluded or non-excluded) from other kinds of payments made on termination of employment.
Multiple ETP payments for the same termination: As of 1st July 2012 employees may receive two ETP payment summaries. Please see the ATO's website for more information on termination payments.
|
ETP Code |
Description |
|
R |
The ETP was paid this year and is due to an early retirement scheme, genuine redundancy, invalidity; or compensation as a result of personal injury, unfair dismissal, harassment or discrimination. |
|
O |
This Code relates to any other type of ETP, also paid this year, such as a golden handshake, payment in lieu of notice, payment for unused sick leave or RDO. |
|
S |
This Code relates to ETPs paid this year, and for the same reasons as Code R, but is used when the employee was paid an ETP related to the same termination in the last financial year. |
|
P |
The Code relates to ETPs paid this year, for the same reasons as Code O, but is used when the employee was paid an ETP related to the same termination in the last financial year. |
These Codes are not displayed in the STP Update screen used at end of the year to mark Final Pays.
What Is And Isn't An Employment Termination Payment?
Wagemaster will reference payments in the ETP screen that have been taxed at termination lower or upper cap due to the nature of the termination payment.
It is important to consult the ATO or your accountant if you are unsure of an amount to appear on an ETP payment summary.
For more information about completing the PAYG payment summary, refer to ATO's website.
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No manual changes or editing can be done to the ETP screen in the employee file. Please note a manual summary will need to be created outside of Wagemaster if the ETP figures in Wagemaster are not correct. You will be required to use the following paper forms prescribed by the ATO:
The paper annual report will be an additional lodgement to any electronic lodgement made. |
|
Please see the section on Excluding Employees From Wagemaster ATO Payment Summary Print Process in this article below. |
Excluding Employees From Wagemaster ATO Payment Summary Print Process
To exclude employees from the ATO payments summary print process:
- Navigate to Employee File > Payments > ATO Summaries > Delivery Options.
- Tick the Exclude this employees ATO Payment Summaries from export/print process box.
- Notice too, equivalent tick box for when you are live in STP Reporting.
Amended Payment Summaries
An original payment summary must have been produced in Wagemaster.
However, any error identified after the original payment summary produced cannot be fixed in Wagemaster. You will not be able to produce an amended ATO payment summary from Wagemaster and you will need to manually lodge the amended payment summary outside of WageEasy.
You cannot change the information on a payment summary after you have either:
- Given it to your employee.
- Provided your PAYG withholding payment summary annual report to the ATO.
If you find a mistake with any amount or ETP Code after giving the payment summary to your employee or the ATO, you should complete a manual amended payment summary, placing X in the amending a payment summary box.
If there is a change in circumstances and you have not issued the payment summary to your employee, or lodged your annual report, you can complete the payment summary according to the updated circumstances.
For example, if an employee retires from their position on a certain date, and that former employee subsequently dies, then the payment and payment summary should be completed as a death benefit ETP and be made to the dependant, non-dependant or trustee of the deceased estate
Please always confirm with the ATO where in doubt.
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