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Update leave categories for STP Phase 2

by Intuit Updated 7 months ago

With Single Touch Payroll Phase 2, there are some changes you may need to make to your leave categories to ensure you're reporting them correctly to the ATO. This article will help you make these changes in QuickBooks Payroll powered by Employment Hero.

What are the changes in STP Phase 2?

With STP Phase 2, any paid leave taken by an employee needs to be correctly reported against a specific leave pay category that is mapped to a payment classification.

For example: to record Annual Leave, you'll need to set up the annual leave category against Annual Leave Taken. Annual Leave Taken is a pay category which should have a payment classification assigned to it. See here to set up payment classifications for your pay categories.

What do I need to do?

Each leave category contains a payment setup option of any of the following:

  • Basic
  • Don't pay for leave taken
  • Report the earnings for the leave taken against another pay category
  • Custom

To check the payment setup of each leave category:

  1. Go to Payroll, then select Payroll Settings.
  2. Select Leave Categories under Pay Run Settings.
  3. Select the leave category and navigate to the payment setup section.

You may need to change settings depending on the type of leave payment setup:


If your leave category is set to Basic, you will need to change this to Report the earnings for the leave taken against another pay category option, and choose the pay category associated with that leave (e.g. Annual Leave Taken for the Annual Leave category).

This is because the Basic payment setup records leave against the primary pay category, e.g. Permanent Ordinary Hours, and as such will not itemise properly.

Report the earnings for the leave taken against another pay category

If your leave category is set to this, we recommend reviewing that the associated pay category is relevant to the leave payment classification. You may need to create new 'leave taken' pay categories for different leave categories. Learn how to create a new pay category here.

Example: If you have jury service leave, paid parental leave and annual leave reported against one 'all in one' leave taken pay category, you may need to separate these leave types and assign payment classifications to each:
- Jury Service Leave Taken
- Paid Parental Leave Taken
- Annual Leave Taken


This setting allows you to transfer leave hours to a specific pay category. Ensure the leave pay category that you're deducting hours from is mapped to the correct payment classification.


  • For termination payouts, excluding death benefits, we have system pay categories that are automatically assigned in the pay run to the leave payout earnings - these will automatically be mapped to the correct payment classifications.
    • However, if you need to pay out leave balances on termination (that are not deemed as ETP or lump sum payments), then you'll need to create a new pay category with the payment classification of Leave - Unused leave on termination and process this within the pay run.
  • For a while now, any new business created has a default set of leave categories that are automatically mapped to their associated leave pay categories. For new businesses created and any existing businesses that have retained these mappings, the associated leave pay categories will be automatically mapped to the correct payment classifications from 9 November 2021.

I've updated my leave categories, what's next?

Below are the changes that most businesses will need to make in preparation for STP Phase 2:

If any of the following apply to your business, make these changes as well:

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