A payment in lieu of notice is not normally worked and is sometimes referred to as gardening leave. This is because the employee is still technically employed by the company.
A payment made to an employee in lieu of notice in a termination pay is included in ordinary time earnings (OTE). Refer to the Australian Tax Office (ATO) page List of payments that are ordinary time earnings.
Entering a payment in lieu of notice in a termination pay
Because payment in lieu of notice is classed as an employment termination payment by the ATO, this amount needs to be entered as part of the termination pay. To do this:
Follow the instructions in the article: Entering a termination payment.
Enter the ETP and Tax amounts within the Term Pay screen. Refer to the ATO page: Employment termination payments for employees.
Super will need to be calculated and paid on the payment In lieu ETP portion as per enter superannuation on an ETP.