• Step 3 – Calculate the amounts to be withheld

    How you work out the amount to withhold depends on whether your employee is leaving because of genuine redundancy, invalidity or through an early retirement scheme, or for another reason.

    Leaving employment because of genuine redundancy, invalidity or an early retirement scheme

    Once the component values have been calculated (see step 2), specific withholding rates are applied to each, as shown in the following table.

    Table 5: Withholding rates

    Component

    Withholding rate

    Pre-16 August 1978

    5% of total at marginal rate, disregarding any cents

    Post-15 August 1978

    32%, disregarding any cents

    Leaving employment for other reason

    Once the component values have been calculated (see step 2), specific withholding rates are applied to each, as shown in the following table.

    Table 6: Withholding rates

    Component

    Withholding rate

    Pre-16 August 1978

    5% of total at marginal rate, disregarding any cents

    Pre-18 August 1993 (i.e. 16 August 1978 to 17 August 1993)

    32%, disregarding any cents

    Post-17 August 1993

    If this unused long service leave component (and unused annual leave) is less than $300, withhold 32% of the total amount, disregarding any cents.

    If this unused long service leave component (and unused annual leave) is $300 or more use the following steps for the marginal rates calculation:

    1. using the relevant PAYG withholding tax tables, work out the amount to withhold from the employee's normal gross earnings for a regular pay period (for example, weekly, fortnightly or monthly)
    2. add 5% of the pre-16 August 1978 component to the post-17 August 1993 component
    3. divide the amount at step 2. by the number of regular periods in a financial year (52 weeks, 26 fortnights or 12 months)
    4. disregard any cents in the result
    5. add the amount at step 4. to the normal gross earnings for a single pay period.
    6. use the regular PAYG withholding tax table used at step 1. to work out the amount to withhold from the amount calculated at step 5.
    7. subtract the withholding amount calculated at step 1. from the amount calculated at step 6.
    8. multiply the amount calculated at step 7. by the number of normal pay periods in 12 months to obtain the amount to withhold from the unused long service leave amount.

     

      Last modified: 23 Sep 2014QC 19081