ETP tax amounts appear on INB Payment Summary

Legacy KB ID: 3765

Question

Why does the tax associated with an ETP payment appear both on the ETP Payment Summary and the INB Payment Summary?  It should appear only on the ETP Payment Summary.

Answer

The ETP tax paid may appear in both the ETP and INB Payment Summaries if

·         The amount of ETP tax entered is greater than the amount that should have been entered;

·         The employee did not have a regular pay with PAYG paid.  This could result from:

o    100% Salary Sacrifice;

o    a low income earner did not earn sufficient amount to pay tax;

o    a court order in a subsequent financial year.

 

Solution

Incorrect ETP tax entered. 

Eligible Termination Payments (ETP) is a complex area and you should familiarize yourself with the process and talk to your Accountant and the Australian Taxation Office.  You must manually calculate the amount of tax following the ATO worksheet in its ETP publications and on their website. 

In QuickBooks you must create the ETP payroll item or items and assign them to the correct Tax Tracking Type.  QuickBooks will calculate the correct amount of tax for that payroll item and show this amount on the ETP Payment Summary.  It does not calculate the tax on the Review or Change Payments screen – you must overwrite the PAYG field with the correct amount to get the correct Net Pay for the final payment.

If you enter a greater amount of tax than QuickBooks calculates, the excess will be posted to the INB Payment Summary.  You will need to review your calculations and use of ETP payroll items so that the amount you enter for PAYG is the correct amount. 

 

Employee did not pay tax

An ETP is processed when an employee is leaving the company.  QuickBooks requires that all normal pays be processed first (including any Lump Sum A, B, C and D payments) and the employee terminated before the ETP Payment Summary can be produced.  An ETP Payment Summary is issued with an INB Payment Summary.  You cannot give an ETP Payment Summary without an INB Payment Summary.

If an employee did not pay tax in the financial year the ETP is being processed, then QuickBooks will publish the correct amount of tax on both the ETP Payment Summary and on the INB Payment Summary (where it will show a Gross Payments amount of zero). 

To avoid the tax amount publishing a second time on the INB Payment Summary you must pay your employee 1 cent (.0.01) and deduct 1 cent (0.01) PAYG tax.  This transaction will force QuickBooks to produce an independent INB Payment Summary showing Tax Withheld as zero (the 0.01 is rounded down to the nearest dollar) and Gross Payments as zero.  Your ETP tax will now show only on the ETP Payment Summary. 

This step will leave you with a 1 cent transaction in your books.  This transaction must remain in your books until you have completed the Empdupe file for this financial year.  If you remove this transaction after printing your ETP and INB Payment Summaries, your Empdupe file will show the tax amount on both the ETP and INB summary sections.  We suggest you make a diary note to delete the 1 cent pay after the Empdupe has been produced and successfully accepted by the ATO.

 

How did we do?

Unable to select previous Tax years in the Payment summaries window

Configuring Employee Title Field Correctly For Payday Filing

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