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  • Approved early retirement schemes

    An approved early retirement scheme is a scheme that an employer puts into place to encourage certain groups or classes of employees to retire early or resign.

    Early retirement scheme payments are tax free, up to a limit depending on the number of years you worked for your employer. The tax-free amount is not part your employment termination payment (ETP). Any amount over the tax-free limit is treated as an ETP.

    The tax-free limit is a flat dollar amount, plus an amount for each whole year of service with that employer. Indexation changes the tax-free limit on 1 July each year. For employees to get special concessional tax rates, the Commissioner of Taxation must approve the scheme before payments start.

    Changes made on 29 October 2019 extends the concessional taxation treatment for genuine redundancy and early retirement scheme payments to include payments made to individuals who are 65 years of age or more provided they are dismissed or retire before they reach pension age. Previously the concession applied to those aged less than 65 years of age.

    These changes apply to payments made on or after 1 July 2019.

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    You need to be wary of people offering to help you gain access to your super savings before you reach your preservation age. Many of these schemes are illegal and heavy penalties apply if you participate.

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    Last modified: 24 Jun 2021QC 27131