• Examples

    Genuine redundancy

    Example 7: Genuine redundancy, no long service leave used, no pre-16 August 1978 service

    Robyn is made redundant on 14 January 2015. She has not yet reached normal retirement age and there is no agreement with her employer to employ her later.

    Robyn has just over 10 years of service, starting her employment on 1 January 2005. She qualified for long service after 10 years, with further leave accruing on each complete year of service.

    On termination of employment she is going to be paid an amount for unused long service leave of $8,000, which is equal to 40 days of unused leave.

    Her normal weekly earnings are $1,000. She has quoted her tax file number and has claimed the tax-free threshold.

    Amount of long service leave accrued in each period

    As all of Robyn’s service relates to the post-15 August 1978 period, the number of days applicable to this period is 40.

    Payment attributable to each period

    As all of Robyn’s service relates to the post-15 August 1978 period, the entire payment of $8,000 is attributable to this period.

    Amount to be withheld

    Post-15 August 1978 component = $8,000 x 32%
    = $2,560

    End of example

    Retirement

    Example 8: Retirement, no long service leave used, pre-16 August 1978 service

    Matt retires on 31 December 2014. He has exactly 38 years of service (13,879 days), starting with his employer on 1 January 1977. Long service leave due is 270 days.

    He is not leaving because of genuine redundancy, invalidity or under an early retirement scheme.

    On termination of employment he is to be paid an amount of $80,000 for unused long service leave.

    His normal weekly wage is $1,200. He has quoted his tax file number and has amounts withheld calculated using column 2 'With tax-free threshold'.

    Total eligible service period

    Pre-16 August 1978 period

    Number of days from 1 January 1977 to 15 August 1978 = 592 days

    Pre-18 August 1993 period

    Number of days from 16 August to 17 August 1993 = 5,481 days

    Post-17 August 1993 period

    Number of days from 18 August 1993 to 31 December 2014 = 7,806 days

    1. Amount of long service leave accrued in each period

    Pre-18 August 1993 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in pre-18 August 1993 period

    Days in long service leave employment period

     

    = 270 x (5,481/13,879)

    = 106.63 (rounded to two decimal places)

    = 106 days (fraction of 0.63 days applied to pre-16 August 1978 period)

     

    Post-17 August 1993 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in post-17 August 1993 period

    Days in long service leave employment period

     

    = 270 x (7,806/13,879)

    = 151.86 (rounded to two decimal places)

    = 151 days (fraction of 0.86 days applied to pre-16 August 1978 period)

     

    Pre-16 August 1978 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in pre-16 August 1978 period

    Days in long service leave employment period

     

    = 270 x (592/13,879)

    = 11.52 (rounded to two decimal places)

    = 11.52 + 0.63 + 0.86 (adding back the fractions of days)

    = 13 days (rounded to whole days)

     

    2. Payment attributable to each period

    Pre-18 August 1993 period

     

    Amount of the payment

    x

    Unused long service leave days in the pre-18 August 1993 period

    Total unused long service leave days

     

    = $80,000 x (106/270)

    = $31,407 (rounded to nearest dollar)

     

    Post-17 August 1993 period

    Amount of the payment

    x

    Unused long service leave days in the post-17 August 1993 period

    Total unused long service leave days

     

    = $80,000 x (151/270)

    = $44,741 (rounded to nearest dollar)

     

    Pre-16 August 1978 period

    Amount of the payment

    x

    Unused long service leave days in the pre-16 August 1978 period

    Total unused long service leave days

     

    = $80,000 x (13/270)

    = $3,852 (rounded to nearest dollar)

     

    3. Amount to be withheld

    Step

    Instruction

    Result

    1.

    Calculate 5% of the pre-16 August 1978 amount to be added to the marginal rate calculation:

    $3,852 x 5%

    $192.60

     

    2.

    Calculate the amount to be withheld from the pre-18 August 1993 component (disregarding any cents in the result):

    $31,407 x 32%

    $10,050

     

    3.

    Add amount calculated at step 1 to the post-17 August 1993 component:

    $192.60 + $44,741

    $44,933.60

     

    4.

    Divide amount calculated at step 3 by number of normal pay periods in a financial year (as Matt receives weekly payments, there are 52 pay periods):

    $44,933.60/52 (disregarding any cents in the result)

    $864

     

    5.

    Add amount calculated at step 4 to normal gross earnings for regular pay period:

    $864 + $1,200

    $2,064

     

    6.

    Using the regular PAYG withholding tax table used to calculate the amount to be withheld from Matt’s normal gross earnings, calculate the amount required to be withheld from the amount calculated at step 5.

    $574

     

    7.

    Using the same PAYG withholding tax table, calculate the amount required to be withheld from Matt’s normal gross earnings of $1,200.

    $252

     

    8.

    Subtract the amount calculated at step 7 from the amount at calculated at step 6:

    $574 – $252

    $322

     

    9.

    Multiply the amount calculated at step 8 by the number of normal pay periods in a financial year:

    $322 x 52

    $16,744

     

    10.

    To calculate total withholding add the amount calculated at step 2 to the amount calculated at step 9:

    $10,050 + $16,744

    $26,794

     

    The total amount to be withheld from Matt’s $80,000.00 payment of unused long service leave on termination of employment is $26,794.

    End of example

     

    Example 9: Retirement, large amount of long service leave used after 15 August 1978, pre-16 August 1978 service

    Sali retires on 31 December 2014. He has exactly 43 years of service (15,706 days), starting with his employer on 1 January 1972.

    He is not leaving because of genuine redundancy, invalidity or under an early retirement scheme.

    Sali was due 270 days of long service leave however Sali took 250 days of long service leave. 90 days of this leave was taken from 25 June 1987 and the other 160 days was taken from 1 September 1995. He is to be paid an amount of $16,000 for unused long service leave on termination of employment, which is equal to 20 days of long service leave.

    His normal weekly wage is $2,400. He has quoted his tax file number and has amounts withheld calculated using column 2 ‘With tax-free threshold'.

    Total eligible service period

    Pre-16 August 1978 period

    Number of days from 1 January 1972 to 15 August 1978 = 2,419 days

    Pre-18 August 1993 period

    Number of days from 16 August 1978 to 17 August 1993 = 5,481 days

    Post-17 August 1993 period

    Number of days from 18 August 1993 to 31 December 2013 = 7,806 days

     

    1. Amount of long service leave accrued in each period

    Pre-18 August 1993 period

     

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the pre-18 August 1993 period

    Days in long service leave employment period

    .

    = 270 x (5,481/15,706)

    = 94.22 (rounded to two decimal places)

    = 94 days (fraction of 0.22 days applied to pre-16 August 1978 period)

     

    Post-17 August 1993 period

     

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the post-17 August 1993 period

    Days in long service leave employment period

     

    = 270 x (7,806/15,706)

    = 134.19 (rounded to two decimal places)

    = 134 days (fraction of 0.19 days applied to pre-16 August 1978 period)

     

    Pre-16 August 1978 period

     

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the pre-16 August 1978 period

    Days in long service leave employment period

     

    = 270 x (2,419/15,706)

    = 41.58 (rounded to two decimal places)

    = 41.58 + 0.22 + 0.19 (adding back the fractions of days)

    = 42 days (rounded to whole days)

    As Sali has used some of his accrued long service leave during his employment, the relevant periods need to be adjusted accordingly:

    Sali used 90 days long service leave from 25 June 1987, therefore the pre-18 August 1993 period should be adjusted:

    94 days – 90 days = 4 days

    Sali used 160 days of long service leave from 1 September 1995, therefore the post-17 August 1993 period should be adjusted:

    134 days – 160 days = -26 days

    The excess should be subtracted from the pre-18 August 1993 period:

    4 days – 26 days = -22 days

    The excess should then be subtracted from the pre-16 August 1978 period:

    42 days – 22 days = 20 days

     

    2. Payment attributable to each period

    As there are no days that apply to either the:

    pre-18 August 1993 period, or

    post-17 August 1993 period,

    the entire payment of $16,000 applies to the pre-16 August 1978 period

     

    3. Amount to be withheld

    Step

    Instruction

    Result

    1.

    Calculate 5% of the pre-16 August 1978 amount to be added to the marginal rate calculation:

    $16,000 x 5%

    $800

     

    2.

    Calculate the amount to be withheld from the pre-18 August 1993 component (disregarding any cents):

    $0 x 32%

    NIL

     

    3.

    Add amount calculated at step 1 to the post-17 August 1993 component:

    $800 + $0

    $800

     

    4.

    Divide amount calculated at step 3 by number of normal pay periods in a financial year (as Sali receives weekly payments, there are 52 pay periods):

    $800/52

    $15.38

     

    5.

    Add amount calculated at step 4 (disregarding any cents) to normal gross earnings for regular pay period:

    $15 + $2,400

    $2,415

     

    6.

    Using the regular PAYG withholding tax table used to calculate the amount to be withheld from Sali’s normal gross earnings, calculate the amount required to be withheld from the amount calculated at step 5.

    $711

    7.

    Using the same PAYG withholding tax table, calculate the amount required to be withheld from Sali’s normal gross earnings of $2,400

    $705

     

    8.

    Subtract the amount calculated at step 7 from the amount calculated at step 6:

    $711 – $705

    $6

     

    9.

    Multiply the amount calculated at step 8 by the number of normal pay periods in a financial year:

    $6 x 52

    $312

     

    10.

    To calculate total withholding add the amount calculated at step 2 to the amount calculated at step 9:

    $0 + $312

    $312

     

    The total amount to be withheld from Sali’s $16,000 payment of unused long service leave on termination of employment is $312.

    End of example

     

    Example 10: Retirement, long service leave used after 17 August 1993, pre-16 August 1978 service

    Kathy retires on 30 September 2014. She has over 42 years of service (15,614 days), starting with her employer on 1 January 1972.

    She is not leaving because of genuine redundancy, invalidity or under an early retirement scheme.

    She is to be paid an amount of $100,000 for unused long service leave on termination of employment, which is equal to 210 days of long service leave. Kathy has taken 73 days of long service leave, all of which was taken after 17 August 1993.

    Her normal weekly wage is $1,500. She has quoted her tax file number and has amounts withheld calculated using column 2 ‘With tax-free threshold'.

    Total eligible service period

    Pre-16 August 1978 period

    Number of days from 1 January 1972 to 15 August 1978 = 2,419 days

    Pre-18 August 1993 period

    Number of days from 16 August 1978 to 17 August 1993 = 5,481 days

    Post-17 August 1993 period

    Number of days from 18 August 1993 to 31 December 2013 = 7,714 days

     

    1. Amount of long service leave accrued in each period

    Pre-18 August 1993 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the pre-18 August 1993 period

    Days in long service leave employment period

     

    = 283 x (5,481/15,614)

    = 99.34 (rounded to two decimal places)

    = 99 days (fraction of 0.34 days applied to pre-16 August 1978 period)

     

    Post-17 August 1993 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the post-17 August 1993 period

    Days in long service leave employment period

     

    = 283 x (7,714/15,614)

    = 139.81 (rounded to two decimal places)

    = 139 days (fraction of 0.81 days applied to pre-16 August 1978 period)

     

    Pre-16 August 1978 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the pre-16 August 1978 period

    Days in long service leave employment period

     

    = 283 x (2,419/15,614)

    = 43.84 (rounded to two decimal places)

    = 43.84 + 0.34 + 0.81 (adding back the fractions of days)

    = 45 days (rounded to whole days)

     

    As Kathy has used some of her accrued long service leave during her employment, the relevant periods need to be adjusted accordingly:

     

    Kathy used 73 days long service leave after 17 August 1993, therefore the post-17 August 1993 period should be adjusted:

    139 days – 73 days = 66 days

     

    2. Payment attributable to each period

    Pre-18 August 1993 period

    Amount of the payment

    x

    Unused long service leave days in the pre-18 August 1993 period

    Total unused long service leave days

     

    = $100,000 x (99/210)

    = $47,143 (rounded to the nearest dollar)

     

    Post-17 August 1993 period

    Amount of the payment

    x

    Unused long service leave days in the post-17 August 1993 period

    Total unused long service leave days

     

    = $100,000 x (66/210)

    = $31,429 (rounded to the nearest dollar)

     

    Pre-16 August 1978 period

    Amount of the payment

    x

    Unused long service leave days in the pre-16 August 1978 period

    Total unused long service leave days

     

    = $100,000 x (45/210)

    = $21,429 (rounded to the nearest dollar)

     

    3. Amount to be withheld

     

    Step

    Instruction

    Result

    1.

    Calculate 5% of the pre-16 August 1978 amount to be added to the marginal rate calculation:

    $21,429 x 5%

    $1,071.45

     

    2.

    Calculate the amount to be withheld from the pre-18 August 1993 component (disregarding any cents):

    $47,143 x 32%

    $15,085.76

    3.

    Add amount calculated at step 1. to the post-17 August 1993 component:

    $1,071.45 + $31,429

    $32,500.45

    4.

    Divide amount calculated at step 3 by number of normal pay periods in a financial year (as Kathy receives weekly payments, there are 52 pay periods):

    $32,500.45/52

    $625.00

    5.

    Add amount from step 4 (disregarding any cents) to normal gross earnings for regular pay period:

    $625 + $1,500

    $2,125

    6.

    Using the regular PAYG withholding tax table used to calculate the amount to be withheld from Kathy’s normal gross earnings, calculate the amount required to be withheld from the amount calculated at step 5.

    $598

    7.

    Using the same PAYG withholding tax table, calculate the amount required to be withheld from Kathy’s normal gross earnings of $1,500.

    $356

    8.

    Subtract the amount calculated at step 7 from the amount calculated at step 6:

    $598 – $356

    $242

    9.

    Multiply the amount calculated at step 8 by the number of normal pay periods in a financial year:

    $242 x 52

    $12,584

    10.

    To calculate total withholding add the amount calculated at step 2 to the amount calculated at step 9:

    $15,085 + $12,584

    $27,669

    The total amount to be withheld from Kathy’s $100,000 payment of unused long service leave on termination of employment is $27,669.

    End of example

     

    Example 11: Retirement, long service leave used before and after 16 August 1978 and after 17 August 1993, pre-16 August 1978 service

    Ian retires on 31 October 2014 with exactly 42 years of service (15,340 days), having started with his employer on 1 November 1972.

    Ian is not leaving because of genuine redundancy, invalidity or under an early retirement scheme.

    He is to be paid an amount of $39,000 for unused long service leave on termination of employment, which is equal to 140 days of long service leave. During his employment, Ian has taken 220 days of long service leave with 50 days used from 1 January 1977, and the remaining 170 days used from 25 May 1999.

    His normal weekly wage is $1,500. He has quoted his tax file number and has amounts withheld calculated using column 2 'With tax-free threshold'.

    Total eligible service period

    Pre-16 August 1978 period

    Number of days from 1 November 1972 to 15 August 1978 = 2,114 days

    Pre-18 August 1993 period

    Number of days from 16 August 1978 to 17 August 1993 = 5,481 days

    Post-17 August 1993 period

    Number of days from 18 August 1993 to 31 October 2014 = 7,745 days

     

    1. Amount of long service leave accrued in each period

    Pre-18 August 1993 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the pre-18 August 1993 period

    Days in long service leave employment period

    = 360 x (5,481/15,340)

    = 128.63 (rounded to two decimal places)

    = 128 days (fraction of 0.63 days applied to pre-16 August 1978 period)

     

    Post-17 August 1993 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the post-17 August 1993 period

    Days in long service leave employment period

    = 360 x (7,745/15,340)

    = 181.76 (rounded to two decimal places)

    = 181 days (fraction of 0.76 days applied to pre-16 August 1978 period)

     

    Pre-16 August 1978 period

    Days of long service leave accrued during

    long service leave employment period

    x

    Days in the pre-16 August 1978 period

    Days in long service leave employment period

     

    = 360 x (2,114/15,340)

    = 49.61

    = 49.61 + 0.63 + 0.76 (adding back the fractions of days)

    = 51 days

    As Ian has used some of his accrued long service leave during his employment, the relevant periods need to be adjusted accordingly:

    Ian used 170 days long service leave after 17 August 1993, therefore the post-17 August 1993 period should be adjusted:

    181 days – 170 days = 11 days

    There are 11 days of unused annual leave applicable to the post-17 August 1993 period.

    There are 128 days of unused annual leave applicable to the pre-18 August 1993 period.

    Ian used 50 days of long service leave prior to 16 August 1978, therefore the pre-16 August 1978 period should be adjusted:

    51 days – 50 days = 1 day

    There is now 1 day of unused annual leave applicable to the pre-16 August 1978 period.

     

    2. Payment attributable to each period

    Pre-18 August 1993 period

    Amount of the payment

    x

    Unused long service leave days in the pre-18 August 1993 period

    Total unused long service leave days

     

    = $39,000 x (128/140)

    = $35,657 (rounded to the nearest dollar)

    Post-17 August 1993 period

    Amount of the payment

    x

    Unused long service leave days in the post-17 August 1993 period

    Total unused long service leave days

     

    = $39,000 x (11/140)

    = $3,064 (rounded to the nearest dollar)

     

    Pre-16 August 1978 period

    Amount of the payment

    x

    Unused long service leave days in the pre-16 August 1978 period

    Total unused long service leave days

     

    = $39,000 x (1/140)

    = $279 (rounded to the nearest dollar)

     

    3. Amount to be withheld

    Step

    Instruction

    Result

    1.

    Calculate 5% of the pre-16 August 1978 amount to be added to the marginal rate calculation:

    $279 x 5%

    $13.95

     

    2.

    Calculate the amount to be withheld from the pre-18 August 1993 component (disregarding any cents):

    $35,657 x 32%

    $11,410

    3.

    Add amount calculated at step 1 to the post-17 August 1993 component:

    $13.95 + $3,064

    $3,077.95

    4.

    Divide amount calculated at step 3 by number of normal pay periods in a financial year (as Ian receives weekly payments, there are 52 pay periods):

    $3,077.95/52

    $59.19

    5.

    Add amount calculated at step 4 (disregarding any cents) to normal gross earnings for regular pay period:

    $59 + $1,500

    $1,559

    6.

    Using the regular PAYG withholding tax table used to calculate the amount to be withheld from Ian’s normal gross earnings, calculate the amount required to be withheld from the amount calculated at step 5.

    $377

    7.

    Using the same PAYG withholding tax table, calculate the amount required to be withheld from Ian’s normal gross earnings of $1,500

    $356

    8.

    Subtract the amount calculated at step 7 from the amount calculated at step 6:

    $377 – $356

    $21

    9.

    Multiply the amount calculated at step 8 by the number of normal pay periods in a financial year:

    $21 x 52

    $1,092

    10.

    To calculate total withholding add the amount calculated at step 2 to the amount calculated at step 9:

    $11,410 + $1,092

    $12,502

    The total amount to be withheld from Ian’s $39,000 payment of unused long service leave on termination of employment is $12,502.

    End of example
      Last modified: 23 Sep 2014QC 19081