ETP and Whole-of-income Caps

These topics use the example of a termination with large ETPs to show how the ETP cap and whole-of-income cap are calculated and applied.

We strongly recommend that you use the following ATO document as a guide because it contains examples of ETP calculations:
http://www.ato.gov.au/Individuals/Working/In-detail/Leaving-a-job/Taxation-of-termination-payments/?anchor=employment_termination_payment#employment_termination_payment

Brent Anderson who is aged 48 was made redundant on 30/11/2012 after 6 years' service.

Note: The tax rates and thresholds used are those applicable as at the date of payment.

1. Navigate to Brent’s Employees | Payroll | Payroll | ETP tab.
2. Click Edit, and then press Insert.

   The Add Employee Terminations | Details tab appears.

3. Enter the following values:

   Field	Value
   Description	1207 Redundancy
   Termination date	30/11/2012
   Termination reason	REDUNDANCY
   Date of payment	30/11/2012

   

4. Enter the following values on the Employment Termination Payments tab:

   Field	Qualify as tax-free up to limit	Excluded/ Non-excluded payment	Amount
   Retirement payment	Yes (default)	Excluded (default)	40000.00
   A gratuity or golden handshake	No	Non-excluded (default)	100000.00

   

   Exolvo derived Brent’s sick leave values from his record.

   You do not need to add any other details because Brent has no leave without pay (LWOP) days.

5. Click Save.
6. When the Confirm messages appear, click Yes.

   Now you can check Brent’s termination details.

   The Pre-Payment Details tab displays a breakdown of Brent's ETP values. See ETP Tax Calculations for details.

   

   The Payment Summaries tab contains two Employee Termination Payment Summaries makeup records that were created when you saved Brent's Employee Terminations record.

   Excluded payments record:

   

   Note: Total tax withheld and Amount under cap are calculated when you process the termination pay.

   Non-excluded payments record:

   

   Now you can add Brent's termination transaction.

7. Open a monthly manual pay for the period ending 30/11/2012.
8. Add a Termination transaction with the following values:

   Field	Value
   Date terminated	30/11/2012
   Reason Code	REDUNDANCY
   Employee termination record	1207 Redundancy
   Note: Exolvo copied these details from Brent's Employee Terminations record.
   Pay LSL Entitled	Yes
   Pay LSL ProRata	No
   Note: Brent lives in Tasmania, and under the terms of the Long Service Leave Act 1976, he is not paid pro-rata long service leave on termination.

9. Save your changes.
10. Process Brent's transactions (F9).

    The Drill Down area displays Brent's termination pay transactions.

    

11. In the main menu, click View | Proposed Changes to see ETP calculation details.

    

12. Exit Transaction View.
13. Process and close the manual pay.
14. Open Brent's Employee Terminations record.

    Brent's Employee Termination Payment Summaries | Notes tab shows how the ETPs were calculated.

    Note: You can copy (Ctrl+C) and paste (Ctrl+V) this information into other applications.

Topic: 40924