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Most small businesses in Australia have employees. One of the most common payroll errors is incorrect processing of termination payments when employees leave.
With the introduction of Single Touch Payroll Phase 2, getting payroll correct is more important than ever, as the data is reported directly to other government agencies. If payroll details are not accurate, it could affect employees' benefits or income tax.
Final Payments
Final payments for employees can range from very simple to highly complex. It depends on the circumstances of the termination, the industry, the modern award or registered agreement, age and other factors.
Before you pay an employee who is leaving your business, you’ll need to gather information to ensure accuracy.
A termination payment can be made up of several elements:
Taxation of Termination Payments
Taxation can also be complex for final payments. Some payments are taxed at marginal rates and others at a flat rate. Special codes must be included in some termination pays to notify the ATO of payment types. For some payments, there are thresholds that must be observed that will affect the termination payment's tax rates and taxable amount.
Getting Help
The best general authorities for learning more about termination payments are the Fair Work Ombudsman and the Australian Taxation Office. For more complex payroll and termination payments, our payroll specialists can help, or we can refer you to an employment law expert if needed.
Fixing termination payroll errors can be costly and time-consuming, not to mention problematic for the employee if categories or taxes are incorrect.
Get in touch with your WDF Professional team member to help you through employee termination payments. Phone 02 6921 5444 or email accountants@wdf.com.au
Client Services Manager
As accountants based in Wagga Wagga, we don't just crunch numbers and put figures in boxes, we provide a carefully researched and tailored accounting solution that suits all of our clients.
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