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How is PAYG Calculated on Leave Payouts?

by Intuit Updated 8 months ago

PAYG amounts are calculated on leave payouts using the guidelines set out by the ATO.

Once you have chosen to terminate an employee from within the pay run the ATO formula will be applied to the leave payout component and be added to the standard PAYG amount that an employee will be required to pay.

For additional information please view the ATO Website: Tax table for unused leave payments upon termination 

Calculations can be viewed when clicking on the ? icon next to the employee's PAYG field.

Overriding an employee's normal gross earnings

If you want to override this calculated amount and enter a different amount, you can do this by selecting Override normal gross earnings. This will unlock the field, allowing you to then enter your desired amount:

When you select Save, the termination pay will automatically recalculate based on the new normal gross earnings amount entered.

Note: There may be circumstances where the termination PAYG amount does not change from the initial amount. This is simply because the difference between the initial and updated normal gross earnings figure is similar enough to not change the amount. 

Leave Payments for Genuine Redundancy ETPs (Employment termination payment)

If your leave payouts form part of a genuine redundancy employment termination payment, we will apply a tax rate of 32% to those payments (as per the ATO tax schedule referenced above) as well as allocating the payment/s  to a pay category that will be reported as a Lump Sum A value on the employee's income statement (payment summary).

Content sourced from Employment Hero

QuickBooks Online Payroll Standard

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