Business Definition

There are changes on how lump sum payments will be categorised.

The lump sum type codes employers can include in STP reports such as:

Lump Sum A - is for certain unused leave that is paid out on termination.

1. Lump sum type code R – for all unused annual leave or annual leave loading, and the component of long service leave that accrued from 16 August 1978 that is paid out on termination only for genuine redundancy, invalidity or early retirement scheme reasons.

2. Lump sum type code T – for unused annual leave or annual leave loading that accrued before 17 August 1993, and long service leave that accrued between 16 August 1978 and 17 August 1993 that is paid out on termination for reasons other than genuine redundancy, invalidity or an early retirement scheme.

Lump Sum B - is for long service leave that accrued before 16 August 1978 that is paid out on termination, no matter the reason for termination.

Lump Sum D - represents the tax-free amount of only a genuine redundancy payment or approved early retirement scheme payment, up to the tax-free limit, based on the employee’s complete years of service, for an employee up to their age-pension age.

There are also lump sums employer can report which are not paid when an employee leaves:

These changes include the following:

Lump sum E - If employers make a lump sum E payment ( this is a back payment which accrued, or was payable more than 12 months before the date of payment and are greater than or equal to the lump sum E $1,200 threshold ) the amount for each financial year relevant to the lump sum E amount paid must be included in STP report before finalising employee’s records. In most cases, this will remove need for employers to provide lump sum E letters.

Example: Lump sum E reporting

Due to an administration error, it is identified on 15 March 2022 that Debbie has not been paid his higher duties allowance for the past 22 months totaling $3,300. Using the normal ATO backpay rules, the payer has split the payment into the following categories:

• The past 12 months of backpay (15 March 2021 to 15 March 2022) totals $1,800. This is taxed and reported in the current financial year. As the backpay is for an allowance, it will be reported in the appropriate allowance field.

• The amount that is greater than 12 months old (14 March 2021 and earlier) totals $1,500 which means it must be reported as Lump sum E because it is greater than the lump sum E threshold of $1,200. The Lump sum E component must be allocated to the appropriate financial year. $600 relates to the 2020-21 financial year and $900 relates to the 2019-20 financial year.

Here is how this would be reported in STP Phase 2.

• KN tasks: $1,800

• Lump sum E 2021: $600

• Lump sum E 2020: $900

Employer does not need to provide employee with a letter as the lump sum E amounts have been allocated to the appropriate financial years in the STP report.

Lump sum W - Return to work payments, which are paid to induce a person to resume work (for example, to end industrial action, bonuses paid to an ex-employee to encourage them to return to employer, bonuses paid to an employee who has resigned and is encouraged to withdraw their resignation) were previously included in gross. If a back payment or arrear payment is made it may be included as lump sum W.

DataPay Setup

Lump Sum E

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Attributes for setting up a superable lump sum E component

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Attributes for setting up a non-superable lump sum E component

To make a lump sum payment that will be reported under STP with the correct financial year, the lump sum E payment the should be added to an pay packet. The payment(s) value(s) will need to be manually calculated and recorded on the pay packet along with the respective financial year.

In this example, this employee has lumpsum E payments related to financial years 2020 and 2021 and is receiving a lump sum E payment in the current pay packet.

Lump Sum W

A component will be reported under Lump Sum W if it is set up to output the Return To Work Payment attribute: