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Tax on Long Service Leave

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Newbie

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hello,

I have a casual employee who commenced work in 1999 retiring and i am trying to find out how much tax to take out of her Long Service Leave payment.  I have totally confused myself looking at schedule 7.  Do I just apply the marginal rate or do i follow a particular formula? 

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Community Support

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Hi @tm,

 

Welcome to the Community.

 

The tax that applies to a payment of unused leave (in termination) is dependent on three factors:

  • the type of leave being paid out
  • the reason the leave is being paid out, and
  • when the leave was accrued.

 

Based on the information you’ve provided in your post, the unused long service would be subject to marginal tax rates – this is based on it being paid out due to ‘normal termination’ (retirement) and the long service leave being accrued after 17 August 1993.  You will need to follow the formula to work out the applicable marginal tax rate.

 

You can use our guide Withholding from unused leave payments on termination of employment on our website to work out the tax to withhold.  This guide goes through each step you need to take to work out the tax – it also includes a number of examples.

 

Hope this helps.

 

Thanks, NicM.

1 REPLY 1
Highlighted

Best answer

Community Support

Replies 0

Hi @tm,

 

Welcome to the Community.

 

The tax that applies to a payment of unused leave (in termination) is dependent on three factors:

  • the type of leave being paid out
  • the reason the leave is being paid out, and
  • when the leave was accrued.

 

Based on the information you’ve provided in your post, the unused long service would be subject to marginal tax rates – this is based on it being paid out due to ‘normal termination’ (retirement) and the long service leave being accrued after 17 August 1993.  You will need to follow the formula to work out the applicable marginal tax rate.

 

You can use our guide Withholding from unused leave payments on termination of employment on our website to work out the tax to withhold.  This guide goes through each step you need to take to work out the tax – it also includes a number of examples.

 

Hope this helps.

 

Thanks, NicM.