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Lump sum E payments

A lump sum E is an amount of back payment that accrued, or was payable, more than 12 months before the date of payment and is $1200 or more. If you're not sure if a back
payment should be reported to the ATO as a gross payment or lump sum E,
speak to your accounting advisor or the ATO.

For Single Touch Payroll (STP) Phase 2, if you assign Lump Sum E as the ATO reporting category when setting up for a back payment, you'll need to choose the Financial year the lump sum relates to. For example, it might be for back pay that accrued in the 2018/19 financial year. Learn more about STP Phase 2 on the ATO website.

Example pay item with lump sum E fields highlighted

Lump sum E payments which span multiple years

If a lump sum E payment spans multiple financial years, such as back pay for 2017, 2018 and 2019, you'll need to create separate pay items for each financial year the payment relates to.

Before moving from STP Phase 1 to STP Phase 2

Before you can start reporting to the ATO for STP Phase 2, you'll need to do something about the lump sum E payments you've already paid.

For each lump sum E payment you've already paid, you'll need to work out if:

  • the payment related to one financial year

    Example
    You paid an employee a lump sum E payment of $3300 in July 2021 and reported it to the ATO via STP. This payment related to back pay which accrued over the 2019/20 financial year.

  • the payment related to multiple financial years

    Example
    You paid an employee a lump sum E payment of $3300 in July 2021 and reported it to the ATO via STP. This payment related to back pay which accrued over two financial years: 2018/19 and 2019/20. You work out how much of the $3300 accrued over each financial year:

    • $1300 accrued in 2018/19 (between 01/7/2018 and 30/06/2019)

    • $2000 accrued in 2019/20 (between 01/7/2019 and 30/06/2020)

  • you've created multiple pay items for lump sum payments that relate to the same financial year

    Example
    You created a lump sum E pay item for Mary to pay her $3300 for back pay which accrued in the 2019/20 financial year. You also created a separate lump sum E pay item for Peter to pay him $2500 for back pay which also accrued in the 2019/20 financial year.

Here's how to handle each scenario.

When you move from STP Phase 1 to STP Phase 2, you'll be prompted to enter a financial year against your Lump Sum E pay items.

If you're not sure if a back payment should be reported to the ATO as a
gross payment or lump sum E, speak to your accounting advisor or the
ATO.

As you won't be able to use this pay item again, you should unlink it from your employees.

To advise the ATO of the financial years relating to a lump sum E payment you paid in the current payroll year, you'll need to:

  • create a wage pay item for each financial year a payment related to

  • enter a correction pay to reallocate the original lump sum payment to the new wage pay items, then

  • remove the original lump sum E pay item from all employees as you won't be using it again.

Did you pay the lump sum E payment in a previous payroll year?

You only need to complete task 3 below to remove the lump sum E pay item from all employees.

Multiple lump sum E pay items which relate to the same financial year

Because you can't specify the same financial year in multiple lump sum E pay items, to advise the ATO of these lump sum E payments you've made, you'll need to:

  • create a new wage pay item for the financial year the payments related to

  • enter a correction pay to reallocate the original lump sum payments to the new wage pay item, then

  • remove the original lump sum E wage pay items from all employees as you won't be using them again.

Did you pay the lump sum E payment in a previous payroll year?

You only need to complete task 3 below to remove the lump sum E pay item from all employees.