If an employee is over the age pension qualifying age and accepts an Early Retirement Package, under which cap are the ERP payments taxed? And are leave payouts (accrued after 17 August 1993) taxed as lump sum A or at the marginal rate if connected to an ERP termination?
Hi @Hooley,
Is the employee over their preservation age?
The purpose of the package is to encourage certain demographics to retire early or resign.
If the employee is over their preservation age they wouldn't be eligible for the early retirement scheme.
An early termination payment has 3 components:
The concessional tax rate is 17% if the employee has reached preservation age and 32% if they haven't. Remember amounts above the caps are taxed at 47%.
Lump sum A or B is for unused annual and long service leave.
Have a look at the information on our website where it talks about the early retirement scheme and income statement or payment summary.
Hi @Hooley
We'll do some research and let you know
Hi @Hooley,
Is the employee over their preservation age?
The purpose of the package is to encourage certain demographics to retire early or resign.
If the employee is over their preservation age they wouldn't be eligible for the early retirement scheme.
An early termination payment has 3 components:
The concessional tax rate is 17% if the employee has reached preservation age and 32% if they haven't. Remember amounts above the caps are taxed at 47%.
Lump sum A or B is for unused annual and long service leave.
Have a look at the information on our website where it talks about the early retirement scheme and income statement or payment summary.
Hi @CaroATO.
The employee is over both the Age Pension Qualifying (APQ) age and preservation age. The package was offered to employees over 50 including those over the APQ age. If an employee over the APQ age accepts an offer of an ERP, should the ERP payment be treated the same way as a normal ETP payout on termination which would be taxed under the WOI Cap? Or should the ETP be taxed under the ETP Cap as it relates to an ERP offer?
The second question relates to the taxation of leave for these employees. Should leave accrued after 17 August 1993 be taxed as Lump Sum A as part of an ERP termination or should it be taxed at the marginal rate as would apply for a normal termination?
Hi @Hooley,
If the individual is over the qualifying pension age, the ETP rates will apply. You can view the ETP tax rates from here. For the unused Annual leave you can use Schedule 7 tax table. This will be reported as a Lump sum A or B.
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