At the age of 60, I will be taking a genuine redundancy in January after 37 years with my employer. Terms are very generous and I expect to hit the tax free limit of $260,000. Is the remainder taxed at 17% or the full marginally tax rate of 45%, plus Medicare 2%? I am assuming my 8 months long service leave is taxed at 45%+2%?
Hiya @Atticus 👋
Because you haven't yet reached your age-pension age, the components of your redundancy pay that wouldn't be paid if you voluntarily resigned, are considered the tax-free part of a genuine redundancy. This means that the payment is tax-free up to the tax-free limit: $13,100 + ($6,552 x 37) = $255,542 🤓
The only component that is OTE (subject to super guarantee) is PILON (payment in lieu of notice), as per the ATO guidance. This tax-free amount is reported on your income statement as Lump Sum D.
Note the Fair Work Ombudsman guidance about continuous service that defines how many years. Note also that the ATO relies on that definition but only considers the whole years.
Any amount of your redundancy payment that exceeds that tax-free limit is an ETP Type R taxable component and is taxed at 17% because you have reached the preservation age. 🙂 No super is payable.
As for your unused annual leave, leave loading and LSL that is taxed at 32%, no super is payable and is reported as Lump Sum A type R.
Deanne
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