How do you process Annual Leave taken or accrued during the trading period?

When a trading period commences usually employee contracts are terminated and employees are hired back temporarily from the date of appointment.

In this situation, an employee may accrue annual leave for the trading period and may be paid out the balance of leave accrued during the trading period (i.e. the termination of the employee following the trading period), or where the employee continues to be employed where a business has been sold, the taxation treatment is outlined in the following ATO link: 

Schedule 7 - Tax table for unused leave payments on termination of employment | Australian Taxation Office

Employee Leave Accrual Report

You may create a leave accrual statement that calculates the leave accrued during a trading period (post appointment). The report is available from the Employee reports > Employee Leave Accrual.

The accrual is derived from the wages rate and the leave accrual data entered for each employee.

Leave Payments

Once you have calculated annual leave accrued during the period you will be ready to make payments. To make the payments:

1. Set up the accounts you need
2. Use the Pay Wages features

You may process a payment through Pay wages or by directly entering a payment where the transaction lines are allocated to an employee. Using Pay wages will give you the option of producing a payslip.

Setting up the annual leave accounts for STP2

The below shows the set up of an annual leave account:

ATO list of payment re OTE - Annual leave

Pay Wages

To enter Pay Wages:

1. Navigate to the Transactions menu > Employees > Pay Wage
   

Ensure the Pay Types Leave is added and the account is set to Leave: Annual Leave (Trading) as pictured.

The Pay Types is shown below:

3. Enter the Annual Leave amount in the Annual Leave column
STP2 - The amount of annual leave will be included in the PAYG and Super calculations.

4. Click Pay wages to process the payment

The payroll batch will appear.

1. Print the Pay Slip

2. From the batch toolbar, click Reports.

From the report dialogue select the Pay Slip report.

Annual leave will report on STP2 Payment Summary Report under Leave

Reporting Annual Leave (or Long Service Leave) as Lump Sum A

There may be situations where the insolvency practitioner cannot or should have but did not properly terminate the employment). In these cases, it may be possible to accrue LSL (and AL which becomes Lump Sum A) as varied from the normal situation. 

In the event you need to adjust edit the payments to report the payments as Lump Sum A, see the below article on how to change the reporting of a payroll entry:

https://exalt.zendesk.com/hc/en-us/articles/222093187-Manually-adjusting-PAYG-amounts-reported-on-payment-summaries