When an employee ceases employment, their remaining entitlements need to be paid out. There are many entitlements that could need to be paid out and how these are paid out can change depending on whether the payout is before or after the employee's death.
When paying out annual leave and long service leave after death, these payments are not made to the employee but rather to the employee's estate or entitled person. Since these payments are not made to the employee, and are generally not taxable and not an ETP, they should not appear on the employee's income statement and therefore should not be lodged through STP.
Process unused annual leave after death
Go to Setups, Payroll, Allowances, Maintain.
Enter an Allowance Code for the new Allowance, eg: ALAD (for Annual Leave After Death).
Enter a Description.
Type = Value.
Tax Status = After Tax.
Tax Certificate Code: 0 = Do not show on Tax Certificate.
Amount = 0.00, Variable
Set other settings as you like and select Accept F9.
Paying Normal Hours after an employee's death
If there are any normal hours that need to be paid for an employee that is deceased, an after-tax allowance should also be used for this, using the steps as per above.
How to enter death benefit details on an Eligible Termination Payment (ETP)
This tutorial demonstrates how to enter death benefit details on an Eligible Termination Payment (ETP) to comply with the ATO requirements. For further information on entering termination payments, see: Enter an employee termination pay and terminate an employee.
Before you begin
Australian Taxation Office (ATO) requires that you record beneficiary’s details when paying out a death benefit. You must record such details as beneficiary’s name, address, and tax file number (TFN).
Speak with your accountant and/or refer to the following ATO links for more information:
Entering death benefit details
You may enter the termination payment either as a timesheet, or as an adjustment pay. To enter the death benefit details in a timesheet or adjustment pay screen:
Set the Termination Pay check-box to Yes and choose Term Pay (F5).
Enter all ETP details and select the appropriate ETP Payment Type. The fields relating to the Payment of Death Benefits become available.
Complete all the details of the beneficiary and choose Accept (F9).
Complete the payment details, accept the payment and process it as usual.
Manually adjust the leave balances to zero on the employee Masterfile
After you have completed the transaction, you will need to manually adjust the employees leave balances in their employee Masterfile. See: How to adjust leave entitlement balances for an employee.