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Re: Termination payments - Does unused annual leave accrue further annual leave?

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Hi all

 

I already know that unused annual leave paid out at termination does not accrue super - but I've had a question from an employee recently departed as to whether the unused annual leave should've accrued further annual leave (in the way that ordinary annual leave does). My impression has been that as unused annual leave is not part of OTE, it won't accrue neither super nor further annual leave, but I can't seem to find anywhere that states this in writing that I can refer to.


Any help is very much appreciated!


Thank you,

VT

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ATO Certified

TaxTime Support

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Hi @vidario

 

Welcome to our Community.

 

While there may be some similarities between how super guarantee (SG) is calculated on ordinary time earnings (OTE) and how leave accrues, they are two different things. Some employees (e.g. casual employees) may be eligible for SG but not leave and vice-versa.

 

You will generally find that annual leave accrues over a period of time, so that when you take some time off and use some of that accrued leave, more leave accrues while you are away from work. This is because you are still an employee during that time.

 

If you were to resign and have that accrued leave paid out on termination, you are no longer an employee so there is no more time to accrue more leave.

 

Ultimately though, this isn't a tax question. While we can talk about how the leave should be taxed and whether SG should be paid on it, how it accrues depends on the award, agreement or contract.

 

It may be worth getting in touch with the Fair Work Ombudsman for more information.

 

Hope this helps.

 

Thanks,

 

ChrisR

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Best answer

ATO Certified

TaxTime Support

Replies 1

Hi @vidario

 

Welcome to our Community.

 

While there may be some similarities between how super guarantee (SG) is calculated on ordinary time earnings (OTE) and how leave accrues, they are two different things. Some employees (e.g. casual employees) may be eligible for SG but not leave and vice-versa.

 

You will generally find that annual leave accrues over a period of time, so that when you take some time off and use some of that accrued leave, more leave accrues while you are away from work. This is because you are still an employee during that time.

 

If you were to resign and have that accrued leave paid out on termination, you are no longer an employee so there is no more time to accrue more leave.

 

Ultimately though, this isn't a tax question. While we can talk about how the leave should be taxed and whether SG should be paid on it, how it accrues depends on the award, agreement or contract.

 

It may be worth getting in touch with the Fair Work Ombudsman for more information.

 

Hope this helps.

 

Thanks,

 

ChrisR

Newbie

Replies 0

Thank you very much for your reply, most appreciated! The quote below is really the question I was looking for an answer to - the employee in question was not attached to an award. 

 


@ChrisR wrote:

 

If you were to resign and have that accrued leave paid out on termination, you are no longer an employee so there is no more time to accrue more leave.

 

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