Upcoming changes to employee ETP opening balances

One feature that allows users to easily migrate to this payroll system mid-financial year, whilst ensuring all YTD reporting is streamlined and correct, is opening balances.  

When the opening balances functionality was introduced 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 2 STP, we undertook an audit of the existing opening balances functionality. This article will explain the outcomes and subsequent enhancements that will be released in the week commencing 30 January 2023 as a result of the audit. 

Review insights

There were several insights following the review. These are:

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

ETP earnings not being recorded in the correct opening balances tab

All earnings classified as an ETP must be added in the "Employment Termination Payments (ETP)" tab of the employee's "Opening Balances" screen. The reason for this is to ensure 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 in the applicable ETP pay category field within the "Earnings" tab of the employee's "Opening Balances" screen. This 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 ETP earnings have been  reported in the "Employment Termination Payments (ETP)" tab but the ‘Generate ETP Payment Summary’ checkbox has not been selected. The consequence of not having selected this checkbox is that these earnings will not be reported via STP. The other consequence of not selecting this checkbox was there was no field to report the PAYG associated with the ETP - the tax withheld field would only display when the checkbox was ticked - 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. This limited users in the scenario where multiple payments of the same ETP types had been made 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 ATO.  

Review improvements

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

1. Changes to ETP pay categories in "Earnings" tab 
2. Moving earnings from deleted system pay categories
3. Redesign of ETP functionality
4. Adding a payment date to existing ETP records
5. API changes to employee opening balances 

Changes to ETP pay categories in "Earnings" tab

In order to ensure ETP earnings are being reported correctly and to also eliminate any uncertainty by users of how to report ETP, we will be updating the data that can be added 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 being reported 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 the purposes of 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 don’t differentiate between superable and non-superable earnings. This is because, for reporting purposes - be it using payment summaries or via STP - the ATO doesn't need to know this information. Refer to “Moving earnings from deleted system PCs” below for information on how existing earnings in these soon to be deleted pay categories will be managed.

This change is also reflected in the opening balances file export and the opening balances API. More information on API changes is explained below.

• ETP pay categories will be locked: Users will not be able to enter any amounts directly in any ETP pay category fields. Rather, these fields will be locked as follows:    

Locking these pay categories will ensure that users follow the correct procedure of adding and/or editing ETP amounts from the "Employment Termination Payments (ETP)" tab. 

• Lump Sum D will be treated as a non-ETP pay category: This means that it will be removed 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 system PCs

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 for any business that has entered employee opening balances, regardless of the financial year, to review these amounts and move any affected ETP earnings to the applicable ETP pay category.

Redesign of ETP functionality

We have overhauled the display and process of adding ETP records in an employee’s opening balance screen.

ETP display

ETP records will now be displayed in a table format, as follows:  

Existing records will be converted to the format as displayed above.

Adding an ETP

When adding a new ETP record, users will enter the details within a 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: This 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 2 fields in order to successfully save the ETP record.
• Tax withheld: If a numerical value is entered 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, this checkbox will be disabled and a message (example below) displayed to explain the reason why.   

Saving an ETP

When adding a new or editing an existing ETP record in the new context panel, clicking the “OK” button does not actually save the record. Rather, it will create a pending record and will be labelled “unsaved”, as per the example screenshot below. You must also click the “Save” button for the record to actually 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 “Save” on any one of those tabs will save all the changes made to the employee’s opening balances. If this action is not performed and the user navigates away from the screen or refreshes the screen, the data will be lost (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:

1. Click on the delete (bin) icon displayed to the right of the ETP record;
2. The ETP record will then be crossed out and a “pending delete” label will appear;
3. If user wants to reverse the deletion, click on the icon;
4. Otherwise, if user wants to confirm deletion, click on “Save”.

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 of 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 that existing ETP records will be forced into an error state until the ETP payment date has been added. The following is an example of an existing record that includes no payment date details: 

The “Payment date” field does not display because the “Generate ETP Payment Summary” field is set to ‘No’. 

The equivalent version, once enhancements are released, of the above image will be as follows:

As you can see, 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 “OK” and then “Save”.  

Another important note here is that the tax withheld amount associated with the ETP should be checked and users should ensure the tax amount is entered 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

In order to ensure 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

"earningsLines"

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 2 ETP records can be added to an employee’s opening balance via the API:   

   "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"
}
],

Integration partners must ensure existing opening balances APIs are updated in line with the above changes so as not to cause any impact to the integration.