Hi, I wanted to check that "Payment in Lieu of Service" if from a genuine redundancy can form part of the Type R payment along with the redundancy pay and be tax free if within the tax free limit. I understand super will also be calculated for the In Lieu of Service payment. Is this correct?
Thanks
Hiya @MShelley 👋
Refer to this post that explicitly addresses this issue and provides links to the relevant ATO guidance.
Deanne
I want to expand on this. The ATO has confirmed that the Payment in Lieu of Service if a genuine redundancy is part of the Lump Sum D tax free. They also advised as the PILS is part of the redundancy pay there is no super payable. If it was part of a termination payment and not a genuine redundancy there would be super payable. I can find lots of questions similar to this on this forum where the ATO person who has replied said it is applicable to pay super on, however this does not align with what I was told from the ATO today.
Hiya @MShelley 👋
Refer to this post that explicitly addresses this issue and provides links to the relevant ATO guidance.
Deanne
Hi, thanks for replying. I read the referenced file and apologise in advance for not understanding all of this. Can I check my understanding, you are saying Lump Sum D cannot include PILN? Is that correct? So are you saying that PILN can be included as a genuine redundancy but not part of the Lump Sum D tax free portion?
Yes, @MShelley, 😉 also see this post for more detail. Deanne
Hi, thank you. that is helpful. I think this page on the ATO site is very confusing based on what you have said. The wording "include from"... is that the issue?
Amounts you include from a genuine redundancy
Depending on your employment conditions, a genuine redundancy payment may include:
Any payments that meet the conditions of a genuine redundancy are tax-free up to a limit depending on your years of service with your employer.
Yes, @MShelley, but that's an example of reporting guidance, not PAYGW guidance!
It's 💯 correct, because there's a tax-free threshold for the severance component and up to that threshold is Lump Sum D. Any amount in excess of that threshold is an ETP.
Payroll is complex! 😵
Deanne
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