Schedule 11 – Tax table for employment termination payments
For payments made on or after 1 July 2016
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 (TAA). It applies to withholding payments covered by paragraph 12-85(b) of Schedule 1 to the TAA.
Using this table
You should use this table if you pay an individual an amount that is either:
- an employment termination payment (ETP)
- a delayed termination payment – that is, a payment that would be an ETP but was paid more than 12 months after the relevant termination of employment.
Employment termination payments
An ETP is a lump sum payment you make:
- to an employee when their employment is terminated (referred to as a 'Life benefit' ETP)
- to an employee’s estate because their employment has been terminated due to death (referred to as a 'Death benefit' ETP).
ETPs include lump sum payments paid upon resignation, retirement or death. A payment from a super fund is not an ETP.
A payment must generally be made within 12 months of termination to qualify as an ETP. A payment made outside 12 months is a delayed termination payment, unless we have given approval for the payment to be treated as an ETP.
Tax treatment of ETPs
ETPs can comprise of two different components:
- a tax-free component
- a taxable component.
You only withhold from the taxable component.
Depending on the type of ETP, the concessional tax treatment may be limited to the smaller of:
- the ETP cap
- the whole-of-income cap.
The top rate of tax applies to amounts paid in excess of these caps.
The ETP cap amount for the 2016–17 income year is $195,000. This amount is indexed annually.
The whole-of-income cap amount for the 2016–17 income year is $180,000. This amount is not indexed. This cap is reduced by the other taxable payments that your employee receives in the income year – for example, salary or wages that you have paid to your employee.
In some cases, you may need to include an ETP in the taxable payments when working out the whole-of-income cap.
The ETP payment summary has an ETP code that you use to describe the type of ETP and which cap has been applied to it.
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Last modified: 15 Jun 2016QC 48968