My employer allows cash out of RDO hours. Is tax on the cashout treated the same as payment upon termination (flat 32% tax) or is it marginal tax rates?
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6,391 views1 replies
1 replies
6,391 views
1 replies
Hi @KelliB,
The RDO cashout would not be treated the same as it usually would under an employee termination payment (ETP), as your service as an employee is ongoing and termination doesn't factor in here.
RDO hours are ordinarily considered a 'non-cash benefit', as you're basically contributing additional hours at work per day to accrue flex time (resulting in an RDO).
As such, your employer needs to withhold the amount they would typically have to withhold if the benefit (the RDO) was paid in money.
So in this situation where you're actually being paid the cash benefit for something that's typically considered a non-cash benefit, your employer's withholding obligations are the same as withholding from your ordinary time earnings (thus marginal tax rates apply).
The link below provides some further details:
ATO website- Payments with special rules
ATO
All replies
Hi @KelliB,
The RDO cashout would not be treated the same as it usually would under an employee termination payment (ETP), as your service as an employee is ongoing and termination doesn't factor in here.
RDO hours are ordinarily considered a 'non-cash benefit', as you're basically contributing additional hours at work per day to accrue flex time (resulting in an RDO).
As such, your employer needs to withhold the amount they would typically have to withhold if the benefit (the RDO) was paid in money.
So in this situation where you're actually being paid the cash benefit for something that's typically considered a non-cash benefit, your employer's withholding obligations are the same as withholding from your ordinary time earnings (thus marginal tax rates apply).
The link below provides some further details:
ATO website- Payments with special rules
ATO