Determining Whether the Termination Requires an ETP
The ATO mandates that some termination payments be made in the form of Eligible Termination Payments (ETP). For a termination to require an ETP, you must be able to answer yes to either of these questions:
Is the termination a Bona Fide Redundancy, as defined by the ATO?
Are any of the types of pay that are included in the employee's termination payment considered ETP-eligible, as defined by the ATO?
If the answer to either of these questions is yes, you must complete the ETP process for the employee termination. The ETP process includes these steps:
Entering ETP information.
Creating ETP worksheets for employee review.
Soliciting payment ins tructions from the employee, if necessary.
Creating ETP timecards.
Creating ETPs during the payroll cycle.
Creating ETP payment summaries and submitting them to the ATO.
Completing Reasonable Benefit Limit (RBL) forms for all ETPs over a specified amount, and submitting them to the ATO.
Storing appropriate records regarding ETPs to comply with ATO regulations.
If the termination does not require an ETP, but you are still distributing a termination payment to the employee, you can use the same process to produce regular termination payments. However, with regard to record keeping and reporting, regular termination payments are not regulated by the ATO.
Oracle recommends that you use the Australian Employee Termination Entry program(P75A0008) to enter employee terminations that require ETPs. When you use this program to process terminations, the system creates the history records that are necessary to generate ETP payment summaries, which must be submitted to the ATO. If you manually create an ETP, you must manually calculate all tax information, as well as manually create an ETP Payment Summary.
If the termination does not require an ETP, you can enter the payment manually or use the Australian Employee Termination Entry program, because the tax calculations for a regular termination payment are far less complex than for an ETP. However, if you do enter the payment manually, you must calculate the tax amounts, employee leave balances, and payment amounts manually. Also, to ensure that employee history is updated correctly, you must use the appropriate payment, deduction, benefit, or accrual (PDBA) codes when entering manual termination payments.