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  • ETP caps

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

    Applicable caps for ETPs subject to withholding

    Column 1
    ETP cap only applies to:

    Column 2
    Smaller of the ETP cap or whole-of-income cap applies to:

    a payment made under an early retirement scheme that exceeds the tax-free limit1 (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 base limit and for each complete year of service limit1 (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.

    1 The tax-free base limit for the 2018–19 income year is $10,399 plus $5,200 for each completed year of service.

    For payments in column 2 both caps are considered and the smaller cap applies. Withholding will be made at the top rate of tax on the amount over the smallest cap.

    Find out about:

    Steps to work out smallest cap

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

    1. Add up all taxable payments you made to your employee (excluding the ETP).
    2. Subtract the step 1 result amount from $180,000.
    3. The result from step 2 is the calculated whole-of-income cap.
    4. Compare the calculated whole-of-income cap from step 3 and the ETP cap amount of $205,000 for 2018–19 (or the balance of ETP cap if a payment component has already applied to the ETP cap where there have been multiple payments for the same termination).
    5. If both caps are equal, use the whole-of-income cap. The smaller of the two caps at step 4 is the cap to apply to the ETP taxable component.
    Last modified: 14 Jun 2019QC 55466