How Do I Include an Employment Termination Payment (ETP) in End of Year?

When an employee has been terminated during the financial year, their ETP amounts are automatically carried through from the termination pay into the End of Year Assistant. A separate PAYG payment summary – employment termination payment is generated for that employee in addition to their regular payment summary.

Reviewing ETP Amounts in the End of Year Assistant

1. Open the End of Year Assistant from the Reports section of the desktop app.
2. Work through the wizard until you reach the Payment Summaries step.
3. Select the terminated employee from the list on the left. Their regular payment summary is shown on the right.
4. Click the Advanced button to make the payment summary fields editable. A confirmation prompt will appear before edits are allowed.
5. In the editable view, locate the Total ETP Tax field and click its button to open the Edit ETP Payment Summaries dialog.

Working With the Edit ETP Payment Summaries Dialog

The dialog displays a table of ETP entries for the selected employee. Each row contains:

• Payment Date – the date the ETP was paid.
• ETP Code – a code that identifies the nature of the payment (see below).
• Tax Withheld – the PAYG tax withheld on this ETP.
• Taxable Component – the taxable portion of the ETP amount.
• Tax Free Component – the tax-free portion of the ETP amount.
• Amendment? – tick this if the entry is amending a previously lodged ETP payment summary.

To add an ETP entry, use the add-row control at the bottom of the table. To remove an entry, select the row and use the delete-row control. Click OK when finished to save the changes.

ETP Codes

Select the code that matches the reason for the ETP. The ATO defines the following codes:

• R – Genuine redundancy or early retirement scheme payment.
• O – Other ETP (e.g. gratuity, golden handshake, compensation for loss of employment).
• S – Payment in lieu of notice (where the employment contract specifies an amount).
• P – Invalidity payment (due to ill health).
• D – Death benefit paid to a dependant.
• B – Death benefit paid to a non-dependant (capped component).
• N – Death benefit paid to a non-dependant (non-capped component).
• T – Death benefit paid to a trustee of a deceased estate.

If you are unsure which code applies, refer to the ATO website or consult your tax adviser.

The ETP Payment Summary Document

Once ETP amounts are present, Lightning Payroll produces a separate PAYG payment summary – employment termination payment for that employee when you print or email payment summaries from the Payment Summaries step. This document shows the taxable component, tax-free component, total tax withheld, and the ETP code, and must be provided to the employee.

For general guidance on editing payment summaries, see How Can I Edit Payment Summaries?. For processing the termination pay itself, see How Can I Terminate an Employee (Detailed)?.