Taxation of termination payments (Australia)
| Payment Type | Termination Reason | Leave Accrual Period* | PAYG Calculation | Where on Payment Summary |
|---|---|---|---|---|
| Annual Leave | Bona Fide Redundancy Approved Early Retirement Invalidity Only All Other | All Annual Leave
Pre 18/08/1993 Post 17/08/1993 | Taxed at 31.5%
Taxed at 31.5% Taxed at marginal rates | Lump Sum Payment A
Lump Sum Payment A Salary, Wages, Bonus etc. |
| Annual Leave Loading | Bona Fide Redundancy Approved Early Retirement Invalidity Only All Other |
Pre 18/08/1993 Post 17/08/1993 | Excess over $320 taxed at 31.5%
Excess over $320 taxed at marginal rates | Lump Sum Payment A
Salary, Wages, Bonus etc. |
| Long Service Leave | Bona Fide Redundancy Approved Early Retirement All Other | Pre 16/08/1978 Post 18/08/1978
Post 16/08/1978 to 17/08/1993 Post 17/08/1993 | 5% of value taxed at marginal rates Taxed at 31.5% 5% of value taxed at marginal rates Taxed at 31.5% Taxed at marginal rates | Lump Sum Payment B Lump Sum Payment A Lump Sum Payment B Lump Sum Payment A Salary, Wages, Bonus etc. |
| Bona Fide Redundancy & Approved Early Retirement Scheme Payments | Up to $7,732.00 + ($3,867.00 per completed service year) Payment in excess of above calculation is paid as ETP (see below) | Nil Tax | Lump Sum Payment D | |
| Eligible Termination Payments (ETPs) – Employer Payments | Lieu of Notice Payments Ex Gratia Payments (Golden Handshake) Sick Leave (if applicable) RDO Accrual Invalidity Payments Excess part of Redundancy & Approved Early Retirement Scheme Payments (over Lump Sum D Limit) Any other Termination Payments not falling in Salary & Wages, Lump Sum Payments A, B or D | Pre 01/07/1983 component Post 30/06/1983–Employee 55+ | Nil Tax 15.5% up to $140,000.00, thereafter 31.5% Taxed at 31.5% | ETP Payment Summary ETP Payment Summary ETP Payment Summary |
Notes
Marginal Rates
The following calculation method is used for marginal rates:
$ Value / No of pay periods per year This is irrespective the employee's service (Weekly - 52, Fortnightly - 26, Monthly - 12)
Add this value to the employee's average earnings for the current tax year
Determine the tax on this 'new' value
Deduct this tax value from the tax on the average pay
Multiply this value by No of Pay Periods per year
This is the tax to be deducted from the $ Value
E.g. $10 000-00 / 52 = $192.31
Average Pay: $600
New Pay: $792.31
Tax on New Pay: $173
Tax on Ave Pay: $112
Difference: $61
$61 * 52 = $3172-00
Tax deducted from $10,000-00 = $3172-00
ETP Component - Post 06/1994 Invalidity component
This is based on the employee's service period.
Post 06/1994 A x B A = Total Amount of ETP
C B = No of whole days from termination to date on which employee would have retired
C = Aggregate of whole number of days in service period for ETP and "B"
Pre 01/07/1983 Component
No of days services from Start Date to 01/07/1983 X ETP Amount minus post 06/1994 Invalidity component
Total days service
This value is not subject to PAYG
Post 30/06/1983 Component - Untaxed Element
Post 06/1983 service days X ETP Amount minus Post 06/1994 Invalidity Component
Total service days
Classifying employment terminations
On termination, leave is paid as accrued up to the TERMINATION DATE. 
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