ETP cap amount

An employment termination payment (ETP) is a payment made in consequence of the termination of employment. It can include:

• amounts for unused rostered days off
• amounts in lieu of notice
• a gratuity or ‘golden handshake’
• an employee’s invalidity payment (for permanent disability, other than compensation for personal injury)
• certain payments after the death of an employee.

ETPs do not include:

• a payment for unused annual leave or unused long service leave
• the tax-free part of a genuine redundancy payment or an early retirement scheme payment.

The amount up to the ETP cap amount will be taxed at a concessional rate. The amount in excess of the ETP cap amount will be taxed at the top marginal rate.

Note: A temporary 2% levy applies for the 2014–15, 2015–16 and 2016–17 income years to individuals with a taxable income of more than $180,000 per year. The levy is payable at a rate of 2% of each dollar of a taxpayer’s taxable income over $180,000. This will cease to apply from 1 July 2017.

For more information on the ETP caps that apply, see Taxation of termination payments.