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Re: Redundancy payment tax-free limit years of service calculation for overseas transfer into Aus...

Newbie

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Hi there,

 

I am an employee of a global firm for 13 years total, 10 years was with the firm overseas, and the most recent 3 years in Australia after transferring here.

 

I have been recently made redundant, and would like to understand for the purpose of the redundancy payment tax-free limit years of service calculation, how many years of service would I have with the firm?

 

Thank you.

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Most helpful response

ATO Community Support

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Hi @EasterlyDrake13,

 

It is your total years of service with your employer, which you advised is 13yrs. 

 

The website advises - A genuine redundancy payment is a payment made to you as an employee if you're dismissed because the job you were doing has been abolished. This means your employer has made a decision that your job no longer exists, and your employment is to be terminated.

Your genuine redundancy payment is:

  • tax-free up to a limit based on your years of service
  • concessionally taxed as an employment termination payment (ETP) above your tax-free limit
  • taxed at your usual marginal tax rate for any amount above certain caps.

The tax-free amount is not part of the employee's ETP. It's reported as a lump sum in the employee's income statement or PAYG payment summary – individual non-business. Any amount over the tax-free limit is part of the employee's ETP.

 

Link-

Redundancy payments.

 

All the best.

3 REPLIES 3

ATO Community Support

Replies 2

Hi @EasterlyDrake13,

 

If it's a genuine redundancy you'll receive, the payment will include a portion that is tax-free.  This is up to a limit based on your years of service. 

 

The purpose of the years of service is to calculate the tax-free limit.  A formula can be found on our website with examples to help you gain a better understanding of how the years of service influences the tax-free component.

 

Tax-free formula

 

I wish you all the best.

Newbie

Replies 1

Hi @CaroATO,

 

Thank you for the details below.

 

For years of service in calculating the tax-free portion of the amount, would it be only 3 years in this case or the full 13 years of service I have had with the firm (3 years in Australia + 10 years overseas)?

 

Thank you.

Most helpful response

ATO Community Support

Replies 0

Hi @EasterlyDrake13,

 

It is your total years of service with your employer, which you advised is 13yrs. 

 

The website advises - A genuine redundancy payment is a payment made to you as an employee if you're dismissed because the job you were doing has been abolished. This means your employer has made a decision that your job no longer exists, and your employment is to be terminated.

Your genuine redundancy payment is:

  • tax-free up to a limit based on your years of service
  • concessionally taxed as an employment termination payment (ETP) above your tax-free limit
  • taxed at your usual marginal tax rate for any amount above certain caps.

The tax-free amount is not part of the employee's ETP. It's reported as a lump sum in the employee's income statement or PAYG payment summary – individual non-business. Any amount over the tax-free limit is part of the employee's ETP.

 

Link-

Redundancy payments.

 

All the best.