Loading
This thread is archived and the information may not be up-to-date. You can't reply to this thread.
CKLN(Newbie)Newbie
9 Mar 2022

Hi there,


We need to pay out unused annual leave payment for deceased employee. Payment will be made to the deceased employee's spouse.


It is our understanding that the unused annual leave is NOT part of ETP. No tax to be withheld and it is not taxable income for the spouse.


So here is our confusion.


  • How do we issue a payment summary to the spouse? The payment should not be included in Gross payments (as it will be taxable), not lump sum A or B, not ETP. Does it mean that we do not complete the payment summary?
  • We (employer) can claim deduction for this right?
  • Do we report this amount in W1 when we prepare BAS?


There are guidance about when an employer pays death benefit ETP but case like this, we weren't able to find a clear answer.


Many thanks,


2,620 views
3 replies
2,620 views
3 replies

Most helpful response

Most helpful reply

RenATO(Community Support)Community Support
11 Mar 2022

Hi @CKLN,

 

You're correct there's no withholding requirement for payments made for a deceased employee unless the payment is for a death benefit ETP in which case withholding might apply.

 

If the payment you're making for the deceased employee consists of outstanding salary or wages, paid leave taken, allowances, overtime, bonuses and commissions, or directors’ fees, you won't report these amounts in STP.

 

You'll include the payment in W1 in the BAS however, payments you make to a worker where you haven't withheld or reported the PAYG amounts are called non-compliant payments which in order to claim a deduction for, you'll need to note the reason that there was no withholding on that payment.

 

You can find more information on reporting requirements under Paying an ETP to a death beneficiary.

All replies

Most helpful reply

RenATO(Community Support)Community Support
11 Mar 2022

Hi @CKLN,

 

You're correct there's no withholding requirement for payments made for a deceased employee unless the payment is for a death benefit ETP in which case withholding might apply.

 

If the payment you're making for the deceased employee consists of outstanding salary or wages, paid leave taken, allowances, overtime, bonuses and commissions, or directors’ fees, you won't report these amounts in STP.

 

You'll include the payment in W1 in the BAS however, payments you make to a worker where you haven't withheld or reported the PAYG amounts are called non-compliant payments which in order to claim a deduction for, you'll need to note the reason that there was no withholding on that payment.

 

You can find more information on reporting requirements under Paying an ETP to a death beneficiary.

rxqueen60(Enthusiast)Enthusiast
28 Mar 2022

Hi @RenATO

i have a similar situation to the above, however we weren’t informed the employee had passed so we withheld taxes. This was a few years ago (before STP), and we’ve been contacted by the accountant asking us to amend the payment summary / STP amounts and pay the tax withheld as a gross payment. I can’t see how this is possible but wanted to confirm with the ATO first. Instead I’d imagine the accountant would lodge a trust tax return with the amounts reported in the payment summary and would receive the tax withheld upon lodgement - is this the case? Thanks!

Featured articles

When you need to register for GST

15 Apr 2026 · 4 min read time

Answers to your PAYG instalment questions

16 July 2025 · 5 min read time

Top liked users

  1. Taxduck

    (Taxicorn)

    345 likes

  2. PayrollDeanne

    (Taxicorn)

    332 likes

  3. Bruce4Tax

    (Taxicorn)

    170 likes

  4. YellowPotato

    (Taxicorn)

    159 likes

  5. Peter_Clyne

    (Superuser)

    99 likes

Top contributors

  1. Taxduck

    (Taxicorn)

    1339contributions

  2. PayrollDeanne

    (Taxicorn)

    1288contributions

  3. YellowPotato

    (Taxicorn)

    604contributions

  4. Bruce4Tax

    (Taxicorn)

    458contributions

  5. YEP

    (Devotee)

    280contributions

Loading
Unused annual leave pay for deceased employee | ATO Community