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  • Schedule 28 – Tax table for unused leave payments on termination of employment

    Attention

    For payments made on or after 1 July 2012 to 30 June 2014

    For the 2013-14 income year, there are no changes to income tax rates or thresholds. You can continue to use this tax table as it is current.

    From 1 July 2012, the temporary flood and cyclone reconstruction levy (flood levy) will no longer apply.

    End of attention
    Attention

    This document is a withholding schedule made by the Commissioner of Taxation in accordance with sections 15-25 and 15-30 of schedule 1 to the Taxation Administration Act 1953. It applies to withholding payments covered by section 12-90 of schedule 1.

    End of attention

    Who should use this table?

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    You should use this table if you pay an amount to a payee for unused leave on the termination of their employment or office.

    Unused leave payments on termination of employment or office include:

    • payments for unused annual leave
    • holiday pay
    • leave loading
    • leave bonuses
    • unused long service leave.

    Before calculating the amount to be withheld, you must work out if the payments are being made as a result of a genuine redundancy, invalidity or an early retirement scheme.

    Find out more

    For more information, refer to How to withhold amounts from unused leave payments on termination of employment (NAT 3032).

    For a full list of tax tables, refer to Tax tables.

    End of find out more

    How to work out the withholding amount

    If your payee has given you their tax file number (TFN)

    The amount to withhold is calculated using the table below.

    Attention

    If the post-17 August 1993 lump sum payment from normal termination is less than $300, you must withhold the lesser of the following:

    • the amount worked out using the table below
    • 31.5% of the payment.
    End of attention
    Payment type Reason Accrual dates Withholding rates (including Medicare levy) Payment summary label

    Long service leave

    Normal termination (eg voluntary resignation, employment terminated due to inefficiency, retirement)

    Pre-16 August 1978

    5% of total at marginal rates

    B

    16 August 1978 to 17 August 1993

    31.5%

    A

    Post-17 August 1993

    Marginal rates

    Include in salary/wages

    Termination because of genuine redundancy, invalidity or early retirement scheme

    Pre-16 August 1978

    5% of total at marginal rates

    B

    16 August 1978 to 17 August 1993

    31.5%

    A

    Post-17 August 1993

    31.5%

    A

    Annual leave

    Normal termination (eg voluntary resignation, employment terminated due to inefficiency, retirement)

    Pre-18 August 1993

    31.5%

    A

    Post-17 August 1993

    Marginal rates

    Include in salary/wages

    Termination because of genuine redundancy, invalidity or early retirement scheme

     

    31.5%

    A

    Annual leave loading

    Normal termination (eg voluntary resignation, employment terminated due to inefficiency, retirement)

    Pre-18 August 1993

    31.5%

    A

    Post-17 August 1993

    Marginal rates

    Include in salary/wages

    Termination because of genuine redundancy, invalidity or early retirement scheme

     

    31.5%

    A

    Marginal rate calculation

    To work out the marginal rate, you must:

    1. Using the relevant PAYG withholding tax table, work out the amount to withhold from your payee’s normal gross earnings for a regular pay period.
    2. Divide the amount of the payment by the number of normal pay periods in 12 months (12 monthly payments, 26 fortnightly payments or 52 weekly payments).
    3. Ignore any cents.
    4. Add the amount at step 3 to the normal gross earnings for a single pay period.
    5. Use the same PAYG withholding tax tables used at step 1 to work out the amount to withhold from the amount at step 4.
    6. Subtract the amount at step 1 from the amount at step 5.
    7. Multiply the amount obtained at step 6 by the number of normal pay periods in 12 months (12 monthly payments, 26 fortnightly payments or 52 weekly payments).

    Example

    The following example uses the Weekly tax table – including instructions for calculating monthly and quarterly withholding (NAT 1005) effective from 1 July 2012.

    Beth retires on 31 December 2012. She qualified for long service leave after 10 years of service, with further leave accruing on each completed year of service.

    She is not leaving because of genuine redundancy, invalidity or under an early retirement scheme.

    This week Beth also receives her normal weekly earnings of $600. She has quoted her TFN and has claimed the tax-free threshold. Therefore, the amount withheld is calculated using column 2 of the Weekly tax table – including instructions for calculating monthly and quarterly withholding.

    Details of payment for long service leave

    Pre-16 August 1978 component = $4,750.00

    16 August 1978 to 17 August 1993 component = $8,500.00

    Post-17 August 1993 component = $11,750.00

    Amounts to be withheld

    Pre–16 August 1978 component

    = $4,750.00 × 5% = $237.50

    The marginal rate calculation is used to work out the amount to be withheld from the pre-16 August 1978 component.

    16 August 1978 to 17 August 1993 component

    = $8,500.00 × 31.5% = $2,677.50

    The post-17 August 1993 component of $11,750.00 is also to be withheld at the marginal rate. To simplify the marginal rate calculation for this payee, the pre-16 August 1978 component and the post-17 August 1993 component are added together first = $237.50 + $11,750.00 = $11,987.50

    Now apply the marginal rate calculation to the sum of the two components.

    Step Instruction Result

    1

    Amounts to be withheld from normal gross earnings ($600)

    $56

    2

    Divide the amount of the payment by the number of normal pay periods in 12 months ($11,987.50/52)

    $230.53

    3

    Disregard any cents

    $230

    4

    Add the amount at step 3 to normal gross earnings for a single pay period ($600 + $230)

    $830

    5

    Work out the amount to be withheld from the amount at step 4 ($830)

    $119

    6

    Subtract the amount at step 1 from the amount at step 5 ($119 – $56)

    $63

    7

    Multiply the amount at step 6 by the number of normal pay periods in 12 months ($63 x 52)

    $3,276

    The total amount to be withheld from the three components of Beth’s unused long service leave payments are $2,677.50 + $3,276.00 = $5,954 (see ‘Rounding of withholding amounts’ on this page).

    The total amount to be withheld is then $6010 ($56 withholding from normal earnings plus $5,954 withholding from long service leave).

    End of example

    Normal gross earnings

    Normal gross earnings are all payments, except those relating to termination payments, received in the last full period of employment. This includes taxable allowances, overtime and bonuses. Therefore, your payee’s normal gross earnings should be taken to be the earnings relating to the last full pay period worked.

    Where your payee’s pay fluctuates significantly over a number of pay periods, we will accept an average of gross taxable earnings for the financial year to date over the number of pays received.

    What if a TFN has not been provided?

    If your payee who is receiving the unused leave payments has not provided you with their TFN before the payment is made, you must withhold 46.5% from the payment.

    If your payee is a foreign resident who has not provided you with their TFN, you must withhold 45% from the payment.

    Tax file number declaration

    Any Tax file number declaration (NAT 3092) your payee provides while they were working for you will only be effective:

    • for the period that they were working for you
    • 12 months after you make the last payment.

    Rounding of withholding amounts

    Withholding amounts calculated by applying this table should be rounded to the nearest dollar. Results ending in 50 cents or higher are rounded upwards. If a TFN is not provided, ignore cents when calculating withholding amounts.

    More information

    How to obtain copies of this publication

    You can download a printable version of Tax table for unused leave payments on termination of employment (NAT 3351, 338KB) in Portable Document Format (PDF).

    PAYG WITHHOLDING PUBLICATIONS

    You can access all PAYG withholding tax tables and other PAYG withholding publications quickly and easily from our website. For more information:

    Copies of weekly and fortnightly tax tables are available from most newsagents. Newsagents also hold copies of the following:

    If you need more information about the correct amount of tax to withhold, phone us on either:

    • 13 28 61 if you are an individual
    • 13 28 66 if you are an employer or payer.
    Last modified: 28 Oct 2013QC 25948