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Re: ETP payment

Newbie

Views 1009

Replies 4

I have the following questions regarding to the ETP payment as the employer, hope someone could give me some assistance:


1. If employee received two lots of genuine redundancy in the same financial year, can both payments be eligible for tax-free component and also remaining balance be entitled for concessional tax?
2.ATO website states" 12 month rule does not apply to the taxable component of genuine redundancy payments and early retirement scheme payments", does that mean if the genuine redundancy paid later than 12 month, the tax of the payment still can be treated as like it was paid within 12 month, such as entitled to tax-free component and ETP cap?
3.ATO website states “The whole- of- income cap will be reduced by any other taxable payments ( such as salary and the taxable components of any earlier ETPs) received by the employee in same income year.” Does that mean if employee has earlier ETPs in the same income year, no matter the payment are excluded or non- excluded , the taxable components will be deducted from whole –of -income cap? If the earlier ETPS just one of instalments for the same ETP, it's understandable to take them out from the whole-of-income cap, but if earlier payment is for different ETP? And with different ETP as they came from different employers, how are you going to find the details , are you allowed to seek those information under the Privacy Act?
4. ATO website states” The ETP cap which is reduced by any earlier ETPS paid in the same income year and by any earlier ETPs for the same termination regardless of when they are paid” Does that mean any previous ETP paid to the employees will be deducted from the ETP cap? Do you deduct the whole payment amount which includes both tax free and taxable component?

Thank you.

 

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Former Community Support

Replies 3

Hi @lyao 

If an employee receives two genuine redundancies, as long as they are from two different employers, they are eligible for both the tax-free component and the life benefit termination concessional tax treatment. 

If the payment meets the genuine redundancy rule it can still be treated as within 12 months of employment. This includes the tax-free section of the genuine redundancy.

When using the whole of income cap the amount is reduced by any other taxable payments. This does include other ETP taxable components; it does not include the tax free component of Lump sum D. An employer can only base utilise cap data based on the income derived from them. They are not privy to other taxable income of an employee. This can result in a taxation liability for the employee.

The ETP cap is not reduced by tax free component.

I hope this has answered your queries

Regards

ClareN

4 REPLIES 4

Most helpful response

Former Community Support

Replies 3

Hi @lyao 

If an employee receives two genuine redundancies, as long as they are from two different employers, they are eligible for both the tax-free component and the life benefit termination concessional tax treatment. 

If the payment meets the genuine redundancy rule it can still be treated as within 12 months of employment. This includes the tax-free section of the genuine redundancy.

When using the whole of income cap the amount is reduced by any other taxable payments. This does include other ETP taxable components; it does not include the tax free component of Lump sum D. An employer can only base utilise cap data based on the income derived from them. They are not privy to other taxable income of an employee. This can result in a taxation liability for the employee.

The ETP cap is not reduced by tax free component.

I hope this has answered your queries

Regards

ClareN

Newbie

Replies 2

Hi,ClareN:

Thank you for your response. I just would like further confirm the following points:

1. with ETP cap and Whole- of - income cap, both will be reduced by previous ETP payment no matter from same employer or different employer, but they would not be reduced by any tax free components.
2. when work out ETP and Whole-of- income cap, regarding to earlier ETP payment or employee's assessment income, as employer you just rely on the information available to you, like their bank interest, rental income if you don’t deduct them from the cap as you don’t have the relevant information, it’s not your fault.

 

Kind regards

Li

Former Community Support

Replies 1

Hi @lyao 

To answer to your first question is yes. In terms of the second query an employer can only utilise income paid from them when working out the whole of income cap. They will not reduce by any other income received by the employee including interest, rental income and the like. This is why I stated using the whole of income cap can often result in a tax liability for the employee if they have other income besides employment income.

I hope this clarifies my previous post

regards

ClareN

Newbie

Replies 0

Thank you, Clare.