Upcoming changes to employee ETP opening balances | Payroll Guide

One feature that allows users to easily migrate to our Payroll classic platform mid-financial year, whilst making sure you have the correct Year to Date (YTD), is opening balances. When we introduced the opening balances functionality in the platform, employers were required to report payroll data each financial year to the ATO via payment summary annual reports.

For several years now, Single Touch Payroll has replaced payment summaries as the predominant reporting method for employers. Bearing this in mind, along with the additional reporting requirements introduced as part of Phase Two STP, we undertook an audit of the existing opening balances functionality. The article will explain the outcomes and following enhancements that we will release in the week beginning the 30th January 2023 because of this audit.

Review insights

There were several insights following the review. These are:

• ETP earnings not being recorded in the correct opening balances tab.
• ETP opening balance earnings not being reported via STP. 
• No ability to record multiple payments of the same ETP type when paid on a different date.
• ETP amounts are rounded to the nearest dollar.

ETP earnings not being recorded in the correct opening balances tab

You must add all earnings classified as an ETP in the Employment Termination Payments (ETP) tab of the Employees' Opening Balances page. The reason for this is to make sure ETP earnings are itemised and reported correctly in payment summaries and via STP reporting. We have identified instances, however, where YTD ETP amounts have been entered directly into the applicable ETP pay category field within the Earnings tab of the employee's Opening Balances page. It applies specifically to the following pay categories:

• Pre-1983 Tax Free Superable Component of Employment Termination Payment (Type O).
• Pre-1983 Tax Free Superable Component of Employment Termination Payment (Type P).
• Non-excluded (Superable Type O) Employment Termination Payment.
• Non-excluded (Superable Type P) Employment Termination Payment.
• Unused Leave Payment (Type O).
• Unused Leave Payment (Type P).

The repercussion of entering ETP values within the Earnings tab as opposed to the Employment Termination Payments (ETP) tab is that these earnings are not identified correctly as ETP when generating payment summaries or via STP reporting. Rather, they are reported as normal earnings.

ETP opening balance earnings not being reported via STP

In addition to the above, we have also identified instances where users have reported ETP earnings in the Employment Termination Payments (ETP) tab. But the user did not select the Generate ETP Payment Summary checkbox. The consequence of not having selected the checkbox is that these earnings will not be reported via STP. The other consequence of not selecting this checkbox was that there was no field to report the PAYG associated with the ETP. The Tax Withheld field would only display when you selected the checkbox, which meant that users may have added the tax amount to the general PAYG Amount field.  

No ability to record multiple payments of the same ETP type

The existing method of reporting ETPs only allowed users to report one record of a Type R/S and Type O/Type P. It limited users in the scenario where the user made multiple payments of the same ETP types on different payment dates. Instead, users would have to combine the same ETP type payments and record one entry. 

ETP amounts rounding to the nearest dollar

Any ETP amounts containing cents that were entered directly via the Employment Termination Payments (ETP) tab would round up to the nearest dollar, thereby not reporting the exact amount to the Australian Tax Office (ATO).  

Review improvements

Because of the insights obtained from the review, we will be making changes to the existing opening balances functionality, to provide reporting of ETPs is correct, and to also improve user experience. These improvements include:

• Changes to ETP pay categories in the Earnings tab. 
• Moving earnings from deleted platform pay categories.
• Redesign of ETP functionality.
• Adding a payment date to existing ETP records.
• API changes to employee opening balances.

Changes to ETP pay categories in Earnings tab

To make sure ETP earnings are being reported correctly and to also remove any uncertainty by users of how to report ETP, we will update the data that users can add in the Earnings tab of an employee’s opening balances screen, as follows:

Removal of specific ETP pay categories: When we introduced a more automated method of reporting Type O and Type P payments, we created specific pay categories that would differentiate between superable earnings and non-superable earnings, specifically:

• Pre-1983 Tax Free Superable Component of Employment Termination Payment (Type O).
• Pre-1983 Tax Free Superable Component of Employment Termination Payment (Type P).
• Non-excluded (Superable Type O) Employment Termination Payment.
• Non-excluded (Superable Type P) Employment Termination Payment.
• Unused Leave Payment (Type O).
• Unused Leave Payment (Type P).

To prevent users from entering values in these fields which results in these earnings not reporting as ETP, we are removing these pay categories from the Earnings tab. Why? As stated above, the reason we created these pay categories was to differentiate between superable and non-superable earnings when processing a termination pay in the pay run.

For recording opening balances, however, the intention has always been to do this via the Employment Termination Payments (ETP) tab. As you would be aware, in the ETP tab, we do not differentiate between superable and non-superable earnings. The reason is that, for reporting purposes, be it using payment summaries or via STP,  the ATO does not need to know this information.  The change will also reflect in the opening balances file export and the opening balances API.

We will also lock the ETP pay categories and users will not be able to enter any amounts directly in any ETP pay category fields. Locking these pay categories will make sure that users follow the correct procedure of adding and/or editing ETP amounts from the Employment Termination Payments (ETP) tab. We also will trest Lump Sum D as a non-ETP pay category.

It will mean that we will remove it from the Employment Termination Payments (ETP) tab and users will enter any lump sum D amounts directly within the Earnings tab instead. Any existing lump sum D amounts entered in an employee’s opening balance will not be affected by this change as the amounts will continue to be made available and editable via the Earnings tab.

Moving earnings from deleted platform pay categories

As part of releasing the ETP opening balance enhancements, we will automatically reassign existing amounts entered in the deleted pay categories as follows. We also suggest that any business that entered employee opening balances, regardless of the financial year, review these amounts and move any affected ETP earnings to the applicable ETP pay category.

Redesign of ETP functionality

We have changed the process of adding ETP records to an Employee’s Opening Balances page.

ETP display

ETP records will now display in a table format, and we will also convert existing records to this format.

Adding an ETP

When adding a new ETP record, users will enter the details within a new context panel. Take note of the following when creating an ETP record:

• ETP type: Users can select from either Type O, P, S, and/or R, as applicable. Additionally, users can add multiple records of the same ETP type.
• Payment date: The field is compulsory and must reflect the date the employee was paid their ETP. If an employee was paid ETP earnings on more than one date within the financial year, then a record for each day of payment must be created. 
• Pre-1983 Tax-free component / Taxable component: A numerical value must be entered in at least one of these two fields to successfully save the ETP record.
• Tax withheld: If you enter a numerical value in this field, there must also be a numerical value that is higher than the tax withheld amount entered in the Taxable Component field to successfully save the ETP record.
• Generate ETP payment summary: Users only need to select this checkbox if:
  • The business is not submitting STP events, due to an exemption; and
  • The employee needs a copy of the ETP payment summary.

For any business required to submit STP events, we will disable this checkbox and will display a message to explain the reason.   

Saving an ETP

When adding a new or editing an existing ETP record in the new context panel, clicking the OK button does not save the record. Rather, it will create a pending record and we will label it as unsaved, as per the example screenshot below. You must also click the Save button for the record to save.

We require this additional step because we currently allow users to make changes/updates in all the opening balances tab at once, and then clicking the save button on any one of those tabs will save all the changes made to the employee’s opening balances. If you do not perform this action, and navigate away from the screen or refresh the screen, you will lose your data if added as a new record or not updated if the existing record was edited.

Deleting an ETP

Similar to saving an ETP record, a user must explicitly save a delete request. Specifically, the steps needed to delete a record are:

• Click on the   icon displayed to the right of the ETP record.
• We will then cross the ETP record out and a pending delete label will appear.
• If user wants to reverse the deletion, click on the   button.
• Otherwise, if user wants to confirm deletion, click the Save button.

Add a payment date to existing ETP records

Currently, unless the Generate ETP Payment Summary option in an existing ETP record is set to Yes, there is no ability to record the payment date or tax amount withheld for that ETP. One of the compulsory requirements for reporting ETPs through STP is that the date of payment also be reported.

As such, all existing records will be updated to display the tax-withheld and payment date fields by default.  What this means is we will force all existing ETP records into an error state until the user adds an ETP payment date. Below is an example of an existing record that includes no payment date.

The Payment date field does not display because the user has set the Generate ETP Payment Summary field to the No option. The equivalent version, once we release the enhancements, of the above image, will be as follows

The tax withheld and payment date fields are now made available, but the record does indicate there is an error because the payment date is blank. To fix this, simply edit the record and enter the date the ETP was paid to the employee. Then, click the OK button followed by the Save button.  

Another important note here is that the tax withheld amount associated with the ETP should be checked and users should make sure they enter the tax amount correctly in the ETP record as opposed to the PAYG Amount field within the Super & PAYG tab of the opening balances screen.

API changes to employee opening balances

To make sure the UI and API functionality mirror each other, there will be some changes made to the OpeningBalancesModel resource which is used for the following endpoints:

• GET /api/v2/business/{businessId}/employee/{employeeId}/openingbalances

• POST /api/v2/business/{businessId}/employee/{employeeId}/openingbalances

Earnings Lines

In line with removing the following pay categories from the Earnings tab:  

• Pre-1983 Tax Free Superable Component of Employment Termination Payment (Type O)
• Pre-1983 Tax Free Superable Component of Employment Termination Payment (Type P)
• Non-excluded (Superable Type O) Employment Termination Payment
• Non-excluded (Superable Type P) Employment Termination Payment 
• Unused Leave Payment (Type O)
• Unused Leave Payment (Type P)

These pay categories will not display in a GET query and must not be used in a POST query. If it is used to POST, any earnings reported against those deleted pay categories will instead be assigned to the employee’s primary pay category instead.

primaryEtpType" and "secondaryEtpType

Currently, only a maximum of two ETP records can be added to an employee’s opening balance. Integration partners must make sure existing opening balances APIs are updated in line with the above changes so as not to cause any impact to the integration.     

"primaryEtpType": {
"etpType": "string",
"generatePaymentSummary": "boolean",
"isAmended": "boolean",
"lumpSumD": "double",
"paymentDate": "date-time",
"taxFreeComponent": "double",
"taxWithheld": "double",
 "taxableComponent": "double"},

"secondaryEtpType": {
"etpType": "string",
"generatePaymentSummary": "boolean",
"isAmended": "boolean",
"lumpSumD": "double",
"paymentDate": "date-time",
"taxFreeComponent": "double",
"taxWithheld": "double",
 "taxableComponent": "double" }

To keep in line with the new UI functionality that allows multiple entries of ETP records, the ETP section will change as follows:

"etps":[
{"id":"int32",
"etpType":"string",
"taxFreeComponent":"double",
"taxableComponent":"double",
"taxWithheld":"double",
"isAmended":"boolean",
"paymentDate":""date-time",
"generatePaymentSummary":"boolean"},

{"id":"int32",
"etpType":"string",
"taxFreeComponent":"double",
"taxableComponent":"double",
"taxWithheld":"double",
"isAmended":"boolean",
"paymentDate":""date-time",
"generatePaymentSummary":"boolean"}],