2nd ex gratia paymenr

 Author: PayrollDeanne(Taxicorn)Taxicorn

29 July 2024

Hiya @Sal24 👋

Employers don't always pay the ETP in one single payment at the time employment ends. For a range of reasons we need not address here, many times, the payer pays what ATO calls multiple payment for the same termination. It's taxed as if it WAS all paid at the same time, with some complex subtleties that I will only briefly reference:

• ETP Type - is defined by many factors, including the reason for the termination, which types of payments are paid, thresholds, caps, age of employee etc. If the subsequent payment is the same ETP type as the initial payment, in a subsequent FY, the ETP type will change. If it's a different ETP type, then it's reported as the different type. It's a bit tricky, but something to be aware of. Eg: ETP-R originally and now an ETP-O; or ETP-R and ETP-O originally and now ETP-P (more ETP-O paid in a subsequent FY). Like I said: TRICKY
• Taxing - different types of ETPs are taxed differently, based upon termination reason, thresholds, caps, age of employee etc and what ETPs were already paid for the same termination event. If the ex-gratia payment isn't part of the redundancy (because it's voluntary and the employer decided to pay you this extra amount because they chose to), then it's an ETP-O (or ETP-P, as above). It will be taxed as if it was paid as part of the original, taking into account the reduced caps because of the initial and any subsequent ETPs, but may also take advantage of the increase in any indexed caps (such as ETP cap that increased as of 1 July 2024). The rate of tax may be 32%, 17% or 47%, depending on those many factors!

It's best to see the payslip and any other documentation provided by your former employer, as termination payments truly are quite intricate and, well, TRICKY 🤓

Deanne

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