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  • Unused annual leave

    Payments of unused annual leave on termination of employment are subject to PAYG withholding. You need to know how to calculate the correct withholding and how to complete the employee's payment summary.

    Calculate the correct amount to withhold

    To calculate the correct amount to be withheld from a payment of unused annual leave, you need to know what the payment is made up of, the reason for the payment, and in some cases when leave was accrued. Payments for leave that had already been taken, but are being made at the time of termination of employment are treated the same way as normal wage payments

    Genuine redundancy, invalidity or an early retirement scheme

    A set rate of withholding applies to payments you make for unused annual leave paid because of genuine redundancy, invalidity or under an early retirement scheme.

    Leaving employment for other reasons

    If you pay unused annual leave on termination of employment, for example, because your employee retires, how much you withhold depends on when leave was accrued.


    Last modified: 01 May 2020QC 19081