Things you need to know
Declare at this question employment termination payments (ETPs) you receive due to the termination of your employment. If you receive an ETP, the components of the termination payment may be taxed differently.
If you lose, leave, or change your job, you may receive several lump sum payments and one may be an ETP.
Types of ETPs
ETPs include:
- a gratuity or golden handshake
- genuine redundancy or early retirement scheme payments above the tax-free limit
- severance pay
- non-genuine redundancy payments
- payments in lieu of notice of termination
- unused rostered days off (RDOs)
- unused sick leave
- compensation for loss of job
- compensation for wrongful dismissal, if you receive payment within 12 months of the actual termination of employment
- payments for loss of future super payments
- payments arising from an employee's termination because of ill health (invalidity), other than compensation for personal injury
- lump sum payments after the death of an employee.
Other types of ETPs include:
- death benefit ETPs, these are payments you receive due to another person's death and their employment ending
- foreign ETPs, these are certain ETPs you receive due to the termination of your overseas employment while an Australian resident, and are exempt from income tax under that country's law
- late termination payments, these are certain ETPs you receive more than 12 months after you retire or cease employment.
When not to include an ETP
Don't show the following payments anywhere in your tax return:
- foreign termination payments, these are certain termination payments that aren't exempt from income tax of the foreign country
- ETPs you receive as the trustee of a deceased estate (ETP code T), you must show these payments in the trust tax return of the deceased estate
- departing Australia superannuation payments.
If you don't have an ETP to declare, go to question 5 Australian Government allowances and payments 2025.
What you need to answer this question
You'll need your income statement or PAYG payment summary – employment termination payment.
If you can't find or think there is an issue with your income statements or payment summaries, contact your employer or payer. For more information, see Income statements.
If you receive a foreign ETP, your foreign employer may not give you a PAYG payment summary – employment termination payment. You'll need to convert your foreign ETPs into Australian dollars before you can complete this question, see Foreign employment termination payments in Special circumstances 2025.
Completing your tax return
To complete this question, follow the steps.
If you receive 2 or more ETPs, you'll need to complete an ETP schedule. Go to Step 5.
Step 1
Write at Date of payment the payment date on your income statement or payment summary.
Write at Payer's ABN, your payer's Australian business number (ABN) from your income statement or payment summary.
Step 2
Write the total amount of tax withheld from your ETP, from your income statement or payment summary under Tax withheld at the left of question 4 – label I.
Step 3
Write the taxable component of your ETP, from your income statement or payment summary at question 4 – label I.
Step 4
Print the ETP code, in the CODE box at question 4 – label I.
You must enter a valid code, find it on your income statement or payment summary. Contact your employer or payer if your income statement or payment summary doesn't have an ETP code. If you're unable to contact the employer or payer, read through the codes in the table and select the one that best describes your payment.
|
ETP Code |
Description |
|---|---|
|
R |
If you receive your ETP because of:
|
|
O |
If your ETP isn't described by code R – for example, you receive it because of:
|
|
S |
If you receive a code R ETP in 2024–25 and you had received another ETP (code R or code O), or a transitional termination payment, in an earlier income year for the same termination of employment. |
|
P |
If you receive a code O ETP in 2024–25 and you had received another ETP (code R or code O), or a transitional termination payment, in an earlier income year for the same termination of employment. |
|
D |
If you receive a death benefit ETP and you're a death benefits dependant. |
|
B |
If you receive a death benefit ETP in 2024–25 and you're not a death benefits dependant, and you had received another death benefit ETP in an earlier income year for the same termination of employment. |
|
N |
If you receive a death benefit ETP and you're not a death benefits dependant, and code B doesn't apply. |
You have finished this question. Go to Where to go next.
Step 5
As you received 2 or more ETPs, you need to complete an Employment termination payment schedule using the information on your income statements or payment summaries.
Step 6
When you have completed the ETP schedule, add together:
- all the amounts of tax withheld
- all the taxable component amounts.
Transfer the 2 totals to question 4 in your tax return.
Write the total tax withheld under Tax withheld at the left of question 4 – label I.
Write the total taxable component under Income at label I.
Print M in the Code box.
Don't write any date of payment or payer's ABN.
Step 7
Attach your ETP schedule to your tax return.
Print X in the Yes box at Taxpayer's declaration – question 2.
Where to go next
- Go to question 5 Australian Government allowances and payments 2025.
- Return to main menu Individual tax return instructions 2025.
- Go back to question 3 Employer lump sum payments 2025.