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Annual Leave Cash Out

An annual leave cash-out allows an employee to receive payment for a portion of their accrued annual leave without actually taking time off. Under the Fair Work Act, an employee must retain a balance of at least four weeks of annual leave after the cash-out.

Prerequisites​

  • The employee must have a written agreement for the cash-out.
  • The employee must retain at least four weeks of annual leave after the cash-out.
  • A Leave Cash Out pay item must exist under Payroll > Pay Items. If it does not, see Create a New Pay Item.

Processing the Cash Out​

  1. Navigate to Payroll > Pay Runs and open or create a pay run for the relevant period.
  2. Click on the employee's name to open their pay details.
  3. Click Add Pay Item and select Annual Leave Cash Out (or your custom leave cash-out pay item).
  4. Enter the number of hours being cashed out.
  5. The rate will default to the employee's ordinary hourly rate. Adjust if applicable.
  6. The employee's annual leave balance will be reduced by the cashed-out hours.
  7. Tax will be calculated on the cash-out amount at the employee's marginal rate.
tip

The cash-out amount must be no less than the amount the employee would have been paid had they taken the leave.

STP Reporting​

Leave cash-out payments are reported to the ATO as part of the regular STP submission. Myaccountant automatically categorises the payment under the correct STP reporting category when you use the designated leave cash-out pay item.