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Redundancy and new tax cuts

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Hi ATO community,

For people who were made redundant and received lump sum payment, therefore tax have already been deducted from the taxable component, how does the tax cuts in new budget announcement work? Since there is no ongoing job to take home the tax cuts in the regular income, does this simply mean that when a tax return is submitted next year for 2020-21, the tax cuts can only be applied then, resulting in more tax return? Thanks. 

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Most helpful response

Community Moderator

Replies 1

Hi @Kiri

 

Thanks for your patience with this one.

 

We can confirm that when we process your 2021 tax return, your taxable income will be taxed in line with the recently changed 2020-21 resident tax rates. This of course assumes that you're an Australian resident for tax purposes.

 

When you were paid your employment termination payment (ETP), your employer was required to withhold tax from the taxable component at the applicable ETP withholding tax rate. This rate represents the maximum tax you have to pay.

 

If your marginal tax rate works out to be lower than that rate, we will apply the lower tax rate to your ETP when we process your tax return. In other words, you won't miss out on the resident tax rate changes.

 

If this results in an overall credit on your notice of assessment, generally you will get a tax refund (unless you have a repayable debt with us or another government agency).

3 REPLIES 3

Former Community Support

Replies 2

Hi @Kiri,

 

We are currently working through the detail of recently announced Budget measures. Many of them are not yet law. 

 

For now, take a look at our newsfeed article which has an assortment of useful links, as well as the Budget papers and the New legislation pages on our website.

 

We'll let you know when we have more information.

Most helpful response

Community Moderator

Replies 1

Hi @Kiri

 

Thanks for your patience with this one.

 

We can confirm that when we process your 2021 tax return, your taxable income will be taxed in line with the recently changed 2020-21 resident tax rates. This of course assumes that you're an Australian resident for tax purposes.

 

When you were paid your employment termination payment (ETP), your employer was required to withhold tax from the taxable component at the applicable ETP withholding tax rate. This rate represents the maximum tax you have to pay.

 

If your marginal tax rate works out to be lower than that rate, we will apply the lower tax rate to your ETP when we process your tax return. In other words, you won't miss out on the resident tax rate changes.

 

If this results in an overall credit on your notice of assessment, generally you will get a tax refund (unless you have a repayable debt with us or another government agency).

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Replies 0

Thank you so much for looking into this @ChrisATO , much appreciated!