My employer missed applying for a tax free threshold (?) for my genuine redundancy payment, they corrected by paying back some money into my bank account, notes on payslip: refund of tax overpayment on redundancy. On my ATO online account - income statement - PAYG YTD amount still showing include the tax overpayment. I am not sure if this is correct. The redundancy payment amount showing in lump sump payment A type R.
Hiya @LISA ๐
Terminology is king ๐คด when it comes to redundancy!
Firstly, the components to be paid must be classified correctly to determine how they will be treated for tax, super and STP (ATO publishes the STP data sent as your income statement).
Unused annual, leave loading and LSL paid on redundancy is taxed at 32% and reported as Lump Sum A type R. That's just your leave, not the "redundancy payment" though.
For redundancy payments for a genuine redundancy, there is a tax-free part of a genuine redundancy, up to a limit that has, obviously, no tax withheld and is reported as Lump Sum D.
If the redundancy payment you receive exceeds that tax-free limit, then the remainder is an ETP and is taxed based upon the type (redundancy), the amount in relation to the ETP cap, and your age in relation to your preservation age. It will be reported as ETP type R taxable component and associated ETP PAYG withholding (separate from the normal tax for every other payment).
Many employers are confused about these complex termination payments and get it wrong, as they don't know where to find the instructions. However, they are legally obliged to get the classification, tax, super and reporting right or YOU will be the one paying for their error when you do your tax return ๐ฉ
Get them to fix it, as per above. They can seek assistance from their payroll product provider if they aren't sure how to go about correcting it, or reach out to their accounting association for assistance.
Be aware, if you were paid a payment in lieu of notice (PILON), as is typical upon redundancy, then they must pay super guarantee on it, as per the ATO guidance.
If your employer is not willing to correct their mistakes, report them to the ATO, as employer obligations are subject to penalty. ๐
Deanne
Hiya @LISA ๐
Terminology is king ๐คด when it comes to redundancy!
Firstly, the components to be paid must be classified correctly to determine how they will be treated for tax, super and STP (ATO publishes the STP data sent as your income statement).
Unused annual, leave loading and LSL paid on redundancy is taxed at 32% and reported as Lump Sum A type R. That's just your leave, not the "redundancy payment" though.
For redundancy payments for a genuine redundancy, there is a tax-free part of a genuine redundancy, up to a limit that has, obviously, no tax withheld and is reported as Lump Sum D.
If the redundancy payment you receive exceeds that tax-free limit, then the remainder is an ETP and is taxed based upon the type (redundancy), the amount in relation to the ETP cap, and your age in relation to your preservation age. It will be reported as ETP type R taxable component and associated ETP PAYG withholding (separate from the normal tax for every other payment).
Many employers are confused about these complex termination payments and get it wrong, as they don't know where to find the instructions. However, they are legally obliged to get the classification, tax, super and reporting right or YOU will be the one paying for their error when you do your tax return ๐ฉ
Get them to fix it, as per above. They can seek assistance from their payroll product provider if they aren't sure how to go about correcting it, or reach out to their accounting association for assistance.
Be aware, if you were paid a payment in lieu of notice (PILON), as is typical upon redundancy, then they must pay super guarantee on it, as per the ATO guidance.
If your employer is not willing to correct their mistakes, report them to the ATO, as employer obligations are subject to penalty. ๐
Deanne
Thank you so much Deanne.
I will email them this.
22 Apr 2024 ยท 6 min read time
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