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PAYG withholding for deceased employees

How to meet your tax, super and employment termination payment obligations when an employee dies.

Last updated 10 June 2025

Death of an employee

Generally, you should not withhold amounts from salary or wages paid after the death of an employee. This applies to income that was earned before their death but paid afterwards.

Similarly, you should not withhold amounts from payments for unused annual leave or unused long service leave paid after their death.

You may need to withhold from a death benefit employment termination payment (death benefit ETP). This represents any amount that would have been an paid in ETP if the employee was alive at the time of payment. Examples of payments in a death benefit ETP can include:

  • unused sick leave
  • unused rostered days off
  • a payment for redundancy or retirement (a 'golden handshake').

Payer guide

The following table provides a step-by-step guide for payments made to a deceased employee.

If you report through Single Touch Payroll, you can choose whether to provide a payment summary. For more information, see:

Guide for payments made to a deceased employee

Step

Action

1

Prepare a payment summary for payments made to the employee in the current financial year before the date of death showing:

  • gross payments
  • amounts withheld.

2

Prepare the employee's entitlement including:

  • payments for work or services (including retrospective pay and bonus or commission payments) accrued but not paid before the death of the employee. If an estate tax return is required these payments are included in assessable income.
  • payments for unused annual and long service leave which are tax-free. If an estate tax return is required these payments are not included in assessable income.

Do not:

  • withhold an amount from these payments
  • include details of these payments in the employee's payment summary.

3

Calculate the amount of death benefit ETP. Withhold the required amount as listed in Schedule 11 – Tax table for employment termination payments.

4

Payments for work or services made after the death of the employee are made to either the:

  • estate of the deceased employee
  • person entitled to the money under the relevant law, industrial award or agreement.

These amounts must not be shown on the deceased employee's payment summary. However, the payer may wish to provide the estate, trustee or executor of the deceased employee with a statement about these payments to assist in completion of the income tax return for the deceased estate.

QC27088