ETP caps



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

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The following table lists the types of ETPs subject to withholding and the applicable cap for each type of payment:

Column 1
ETP cap only applies to:
Column 2
Smaller of the ETP cap and whole-of-income cap applies to:

a payment made under an early retirement scheme that exceeds the tax-free limit* (only the amount in excess of the limit is an ETP).

a ‘golden handshake’ whether paid under

  • contract
  • industrial award obligation
  • recognition of prior service.

a genuine redundancy payment that exceeds the tax-free limit* (only the amount in excess of the limit is an ETP).

a non-genuine redundancy payment.

a payment made because of the employee’s permanent disability.

severance pay.

compensation payment for personal injury.

a gratuity.

compensation for unfair dismissal.

a payment in lieu of notice.

compensation for harassment.

a payment for unused sick leave.

compensation for discrimination.

a payment for unused rostered days off.

lump sum payments paid on the death of an employee.

an ETP not covered in column 1.

* The tax-free limit for the 2013–14 income year is $9,246 plus $4,624 for each year of completed service.


For payments in column 2, both caps apply so withhold at the highest marginal tax rate (plus Medicare levy) on the amount over the smallest cap. For more information, see How to work out the withholding amount.

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Steps to work out smallest cap

Follow these steps to work out the smaller of the ETP cap and whole-of-income cap:

Step Action


Add up all taxable payments you made to your employee (excluding the ETP).
In some cases, you may need to include an ETP in the taxable payments when working out the whole-of-income cap. See example 4.


Subtract the step 1 result amount from $180,000.


The result from step 2 is the calculated whole-of-income cap.


Compare the calculated whole-of-income cap from step 3 and the ETP cap amount of $180,000 for 2013–14.


If both caps are equal, use the whole-of-income cap. The smallest of the two caps at step 4, is the cap to apply to the ETP taxable component.

Last modified: 29 Oct 2013QC 34733