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 selected and the employees hire date and leave balances. The possible components are:
Term AL Gross
Term LSL Gross
Term LL Gross (Leave Loading)
Term AL Comp A (could also include RED/INV)
Term LSL Comp A (could also include RED/INV)
Term LL Comp A (Leave Loading)
Term Comp B (for LSL only)
There are also separate components used when the Termination Reason is Death, see Termination transaction due to Death for more information.
Comp A termination leave components will be visible on the Termination Transaction when the Termination Reason is:
Approved Early Retirement
Invalidity
Redundancy
or if the employee has hours in the Entitlement (Pre 18/08/1993) fields in the leave details on their employee record.
Comp B will be visible on the Termination Transaction if the employee has hours in the Entitlement (Pre 16/08/1978) field in Long Service Leave on their employee record.
Term Gross leave components will be used for any other Termination Reason.
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:
Each type of unused leave on termination is taxed in accordance with the ATO.
Gross termination for unused leave will be taxed at Marginal Tax rates
Comp A termination leave components will be taxed at 32%
Comp B termination leave components will be taxed at Marginal Tax rates on 5% of the total
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.