Hiya @paddingtonvg 👋
Firstly, there are three types of payments that MAY be involved:
- Tax-free part of a genuine redundancy
- ETP tax-free component
- ETP taxable component - includes any excess amount over the tax-free part of a genuine redundancy
It's tricky 🫣
The tax arrangements for redundancy payments are varied, depending on a range of factors:
- Genuine redundancy - defined in the Fair Work Act 2009. If the criteria is not met, it is taxed as a normal ETP (ETP type O). If it does meet the criteria, then:
- Tax Concession - for redundancies that meet the criteria in item 1 above, then the ATO permits tax-free parts of the redundancy (Lump Sum D) only for those who haven't reached their age-pension age. If you have reached that age, it is taxed as an ETP type R, taxable component. There may be a tax-free component to the ETP (not to be confused with the tax-free part of a redundancy) if you have service prior to 1 July 1983 or if there's an invalidity segment.
- PILON - payment in lieu of notice (PILON) may be classified in a couple of ways. If your employer NEVER pays out notice to someone who has voluntarily resigned, then PILON would be considered as part of the genuine redundancy (Lump Sum D or ETP type R). However, your employer has classified it as an ETP type O, which indicates that they do/have paid PILON to those who voluntarily resign, so it cannot be part of the genuine redundancy (those payments that are ONLY paid on redundancy).
From how your redundancy was classified, it appears that it either wasn't a genuine redundancy; or it was, but you have reached your age-pension age; and your employer also has/does pay PILON for some voluntary resignations.
If that is not correct, you should contact your employer. It is imperative that they explain why they have classified the payments the way they have, in relation to the hyperlinks to the ATO guidance I provided above. It is best to sort this out with the employer than to try to override the prefill into your tax return, as the ATO will change it back to what they employer reported and you will have to lodge a complaint. However, the source of the data is the employer, so that is who must explain and/or correct it.
Deanne
Thanks Deanne
I have definitely not reached pension age, and my redundancy was genuine. I guess I need to contact my previous employer then. I'll give you an update when I can
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