Accounting for portable long service leave in the community services sector

Traditionally, employees have only been entitled to long service leave (LSL) benefits if they work for the same employer for a minimum time-period (usually 10-15 years of service). Benefits vary from State to State (and Territories) but result in the loyal employee being able to take an additional two to three months leave once they pass the minimum service period. Therefore, employees who moved around from one job to another, often because the nature of their work was not long-term or permanent, missed out on these additional LSL benefits. Some States and Territories have ‘portable LSL’ laws for industries such as construction, coal mining and contract cleaning to address this issue. Victoria, Queensland and the ACT have recently introduced portable LSL laws for the community services sector to address a similar issue in this sector and to help retain employees in the sector.

Employers are required to recognise a provision for LSL leave in accordance with AASB 119 Employee Benefits. This involves estimating the:

  • Number of employees for which LSL is expected to vest
  • Expected future cash outflows when employees take their LSL
  • Timing of the cash outflows, and
  • Appropriate discount rates.
With the new portable LSL schemes for community service employees, many community service organisations think that they no longer have to recognise these LSL provisions. This is not always true. In most cases, the portable LSL schemes have not removed the employer’s primary responsibility to pay LSL to its employees. What has changed is that the employer is now able recover some of these costs from the relevant portable LSL authority.

Ignoring LSL provisions completely is not an option

Legislation relating to portable LSL in the community services sector varies from State to State (and Territories), as does legislation for other types of portable LSL outside the community services sector. Community service organisations should pay careful attention to the law and establish whether they have legal responsibility for making LSL payments to employees.

If they do, the community service organisation must continue to recognise LSL provisions in their financial statements. However, in estimating expected cash outflows, the community service organisation must now estimate the expected recovery for each employee from the relevant portable LSL authority.

Will LSL provisions always be small?

Where the employer can recover all or a significant portion of the LSL paid to its employees, the LSL provision will be significantly reduced.

Employers do need to understand how much they are able to recover from the relevant portable LSL authority when the employee is expected to take leave. This may be difficult for some employers to accurately assess at this stage given the portable LSL schemes in the community services sector are relatively new, and some of the finer details regarding how much the employers are able to claim is still being resolved.

Some of the instances that result in the amount being claimed by the employer being less than the actual amount paid to the employee are:

  • In most circumstances, the period of service by an employee prior to the commencement of the portable LSL scheme will not be covered by the scheme
  • Where superannuation is paid on LSL entitlements, this may not be recovered from the scheme
  • Some employees may receive LSL entitlements that are more generous than that provided by the portable LSL scheme, e.g. some employees may receive 13 weeks LSL for 10 years of service, whereas under the scheme, the employee is only allowed to accrue 13 weeks for 15 years of service, and
  • LSL entitlements for employees that spend a period of time working for the same employer in a State or Territory that does not have a portable LSL scheme in place.


When the portable LSL levy is due for payment to the portable LSL authority, the employer processes the following journal entry:

DR Portable LSL levy expense
CR Cash
For payment of levy to LSL authority

The employer then continues to recognise a provision for LSL. It will need to continue to maintain detailed calculations for LSL leave provisions, and factor into these calculations the amount expected to be recovered from the portable LSL authority when the employee is paid their LSL.

Following is an example calculation where the balance date is 30 June 2021 and the date the portable LSL scheme commenced is 1 January 2021.

Portable LSL levy expense

For the year ended 30 June 2021, the employer therefore recognises a ‘net’ provision, after portable LSL recoveries, of $78,922 as follows:

Dr  LSL expense             $78,992
Cr  LSL provision                                    $78,992

More information

For more information about portable LSL, please contact your local BDO NFP team or watch our recent webinar, Understanding Portable Long Service Leave.

This publication has been carefully prepared, but is general commentary only. This publication is not legal or financial advice and should not be relied upon as such. The information in this publication is subject to change at any time and therefore we give no assurance or warranty that the information is current when read. The publication cannot be relied upon to cover any specific situation and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances.

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