Annual and Long Service Leave can appear as a number of different components in a Termination Transaction. As per the ATO (Australian Tax Office), the component used is dependent on the Termination Reason and the employee's hire date and leave balances.
There are also separate components used when the Termination Reason is Death, see Termination transaction due to Death for more information.
Termination Component A
Comp A termination leave components are used when the Termination Reason is:
Approved Early Retirement
Invalidity
Redundancy
or if the employee has Pre 18/08/1993 entitlement hours in their employee record.
The components include:
Term AL Comp A (could also include RED/INV)
Term LSL Comp A (could also include RED/INV)
Term LL Comp A (Leave Loading)
Comp A termination leave components are taxed at 32%.
Termination Gross
Term Gross leave components are used for any other termination reason, including resignation, dismissal, retirement and non-genuine redundancy. The components include:
Term AL Gross
Term LSL Gross
Term LL Gross (Leave Loading)
Gross termination components for unused leave are taxed at marginal tax rates
Termination Component B
The Comp B termination component (Term Comp B) is used if the employee has Pre 16/08/1978 entitlement hours for Long Service Leave on their employee record.
Five percent of the Comp B termination leave component value is taxed at Marginal Tax rates.
More Information
For more information on which component of leave should be used in the Termination or how to calculate the number of hours for Comp A (Pre 18/8/1993) or Comp B (Pre 16/8/1978), refer to the two ATO links below:
For more information on taxing termination components, refer to Schedule 7 – Tax table for unused leave payments on termination of employment on the ATO website.