• Why the employee is leaving

    The key factor in working out withholding for payment of unused long service leave is the reason why the employee is leaving whether it is because of genuine redundancy, invalidity or through an early retirement scheme, or for another reason.

    Genuine redundancy, invalidity or an early retirement scheme

    This means the employee is leaving employment because of genuine redundancy, invalidity or an early retirement scheme and:

    • the termination time is before the time that retirement or termination would ordinarily have occurred (and in any event before the employee turns 65)
    • you have not been party to any agreement to employ the person later.

    See Definitions for more information.

    The amount to be withheld will depend on the period in which the leave was accrued. To calculate the amount to be withheld in cases where the employee's eligible service period started before 16 August 1978, you will need to divide the payment into the:

    • pre-16 August 1978 component
    • post-15 August 1978 component.

    Once you have divided the employee's payment into these components, see Calculate the correct amount to withhold.

    Leaving employment for other reasons

    Payments of unused long service leave made on termination of employment can occur for other reasons such as:

    • voluntary resignation
    • termination due to inefficiency
    • retirement.

    In these circumstances you will need to divide the payment into the:

    • pre-16 August 1978 component
    • pre-18 August 1993 component (that is, for the period 16 August 1978 to 17 August 1993)
    • post-17 August 1993 component.

    Once you have divided the employee's payment into these components, see Calculate the correct amount to withhold.

    .

    Calculate the correct amount to withhold

    When making a payment of unused long service leave on termination of employment you need to calculate certain payment components that have different withholding requirements. These components are:

    • pre-16 August 1978
    • pre-18 August 1993 (that is, for the period 16 August 1978 to 17 August 1993)
    • post-17 August 1993.

    To calculate the amount to withhold, follow the three-step process:

      Last modified: 23 Sep 2014QC 19081