Schedule 11 – Tax table for employment termination payments
For payments made on or after 13 October 2020
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 schedule
You should use this schedule 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.
If you employ individuals under a working holiday makers visa, you must use the Tax table for working holiday makers for all payments made to them, including employment termination payments.
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 of 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 have two different components:
- a tax-free component
- a taxable component.
You only withhold tax 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 2020–21 income year is $215,000. This amount is indexed annually.
The whole-of-income cap amount for the 2020–21 income year is $180,000. This amount is not indexed. This cap is reduced by any other taxable income payments your employee receives in the income year – for example, salary or wages 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.
Last modified: 13 Oct 2020QC 63806