ETP Overview: Australia

An overview of how to process both automatic Employment Termination Payments (ETPs) and unused leave payments.

ETP payments are lump sum payments that you pay to an employee upon resignation, retirement, or death. Depending on the type of payment, the circumstances regarding the employment termination, and other criteria, the taxation amount will vary. For more information on taxation rates for these different types of ETP and unused leave payments, see the Australian Taxation Office website.

Click on the associated links for more detailed information.

  1. Prior to processing ETPs and unused leave payments, verify that the employment termination limits and rates are up to date. For more information, see ETP Payment Tax Rates and Limits.
  2. Set up the system to process ETPs and unused leave payments. To do this, you will need to create earnings and deduction codes for each payment type. For more information, see About Standard Employment Termination Payments (Australia)
  3. For each employee you are paying, enter a separation date in the Separation Date field in the PR Employees form (Add'l Info tab). If the employee has been terminated due to redundancy or early retirement, select the Separation for Reason of Redundancy or Early Retirement check box.

    Additionally, set up any periods of time for the employees when they were exempt from taxation. For more information, see Set up Tax Free Periods for Terminated Employee Auto Payments (Australia).

  4. Generate ETPs for your employees. For more information, see Generate Payments for Terminated Employees.
  5. Some standard ETP types cannot be automatically generated. You will need to manually enter and process a timecard line associated with the appropriate earnings code. For more information on standard ETPs, see About Standard Employment Termination Payments (Australia). For more information on processing payroll, see Posting Timecards or Processing Payroll.
  6. When you are ready to process an ETP or unused leave payment, enter and process a timecard line associated with the appropriate earnings code for the employee. For more information see Posting Timecards or Processing Payroll.
  7. At the appropriate time, generate and submit your PAYG ETP Summaries. For more information, see About the PR ETP Summary Process Form.