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  • Genuine redundancy and early retirement scheme payments – alignment with the Age Pension age

    In the 2018–19 MYEFO, the Government announced that from 1 July 2019 it would extend the concessional tax treatment of genuine redundancy and early retirement scheme payments, to those who had reached the current age based limit of 65 years but not the Age Pension qualifying age.

    The changes apply to payments received by employees who are dismissed or retire on or after 1 July 2019.

    Treasury Laws Amendment (2019 Measures No. 2) Bill 2019 received Royal assent on 28 October 2019.

    Payments made before the changes became law. Some employees who were paid a redundancy before the changes became law may have had more tax withheld than would be required under the new law. In these circumstances, the employee can ask the employer to refund the excess tax withheld for any payment that qualifies as a genuine redundancy payment. The employer can revise the payment and refund the employee. The employer is not obliged to do this, as at the time the payment was made, the amounts were not withheld in error.

    If the employer agrees to recalculate tax withheld and refund the difference to the employee - and has already paid the ATO the tax withheld through the lodgment of their activity statement - they can revise the activity statement to show the corrected withholding amount for that period. This will enable the employer to receive a refund of the excess tax.

    If the employer reports through Single Touch Payroll (STP), they can make the reporting correction at the next pay event. This will correct the amount reported in the income statement.

    If the employer is not yet reporting through STP and has issued a part year PAYG payment summary – individual non-business and/or PAYG payment summary - employment termination payment, they will be required to issue an amended payment summary to the employee showing the correct amounts.

    If the employer does not recalculate and refund the excess withholding, the employee will receive a credit for the tax withheld when they lodge their income tax return.

    Legislation and supporting material

    Treasury Laws Amendment (2019 Measures No. 2) 2019External Link

    See also:

    • Genuine redundancy payments – aligning access to the tax-free component with the Age Pension age. MYEFO papers (page 121) Link
      Last modified: 29 Oct 2019QC 60158