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Leave entitlements on redundancy payment

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Hi all,

If in a genuine redundancy payout, it included Leave entitlements (LSL + AL) ,  where tax was deducted for that part, is this payment considered income for threshold purposes?
Will the total income for that financial year be just the ' taxable component/ Eligible Termination Payment' or will this be combination of ' the taxable component ETP + leave payout'? 

Thanks

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ATO Community Support

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Hi @Kiri,

 

When you receive a genuine redundancy payment made up of Long Service Leave and Annual Leave then this is treated as a Lump sum A payment.

 

If the Long Service Leave and Annual Leave were accrued after the 17th of August 1993 then they will need to be included in salary and wages in your payment summary and in your tax return at question 3.

 

This means that the inclusion of this income will determine the tax bracket your income fits into for calculating your tax payable.

 

If required a tax offset will be applied to your income tax assessment to adjust the tax payable to the correct amount.

 

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Lump sum payments

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Most helpful response

ATO Community Support

Replies 2

Hi @Kiri,

 

When you receive a genuine redundancy payment made up of Long Service Leave and Annual Leave then this is treated as a Lump sum A payment.

 

If the Long Service Leave and Annual Leave were accrued after the 17th of August 1993 then they will need to be included in salary and wages in your payment summary and in your tax return at question 3.

 

This means that the inclusion of this income will determine the tax bracket your income fits into for calculating your tax payable.

 

If required a tax offset will be applied to your income tax assessment to adjust the tax payable to the correct amount.

 

Links

Lump sum payments

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Replies 1

Thanks so much @RenATO .

So if I understand this correctly, if the total of ( ETP - taxable amount + lump sum A payment) is more than the threshold for Medicare levy surcharge, then you have to pay the levy if you didn't have the private health cover. Sorry for additional question, would appreciate the clarification how this works when working out liability for MLS.

Thanks,

Kiri

ATO Community Support

Replies 0

Hello @Kiri

 

Yes that is correct Smiley Happy

 

You can find more information under: Medicare levy surcharge

 

Regards,

 

Tony