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.

See also:

• Taxation of termination payments for information about ETPs for employers and employees.
• Delayed 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.

See also:

• ETP reporting for more information about ETP codes.
• Taxation of termination payments