Hiya PCity (too new to appear in "Mention someone")
That depends on why the employees "need to be paid out their accrued annual leave" - is it a new ABN? Is the leave liability not continuing with the new owner and that's why you're paying it out? Is there continuity of employment? Is the prior service being recognised? What about the other forms of leave - are they being paid out? Or is this just a requirement under the contract of sale?
Sorry about all those questions! The upshot of it is - is it IN SERVICE for the same payer that will recognise other forms of leave so it actually is cashout of leave in service (other than upon termination) or are the employees being terminated and rehired and their prior service isn't recognised (unused leave upon termination)?
You will know the legal circumstances best.
Cashout of leave in service is taxed marginally as per this ATO guidance using this tax table (NAT 3348). It's reported in STP2 as Paid Leave-C (cashout of leave in service)
Unused leave on termination is taxed as per this tax table (NAT 3351). It's reported in STP2 as either Lump Sum A (type R or T) or Paid Leave-U (unused leave on termination).
I hope that helps - Deanne
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