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  • The 12-month rule

    To receive concessional tax treatment, an ETP must generally be paid within 12 months of termination.

    Payments outside the 12-month period are included in the recipient's assessable income and taxed at their marginal tax rates.

    The 12-month rule does not apply to the taxable component of genuine redundancy payments and early retirement scheme payments.

    A payment that is made more than 12 months after termination can still be treated as an ETP in any of the following circumstances:

    • the delay is due to legal action that began within 12 months of the termination, provided the legal action concerned the entitlement to the payment or the amount of the entitlement
    • the payment is made by a liquidator, receiver or trustee in bankruptcy of an entity that was otherwise liable to make the payment and the date of appointment of the liquidator, receiver or trustee is no later than 12 months after the termination of employment
    • a payment is received from a redundancy trust in some cases.

    See also:

      Last modified: 31 Aug 2021QC 26218