Our ATO Community is here to help make tax and super easier. Ask questions, share your knowledge and discuss your experiences with us and our Community.
I require assistance please. Can an ATO expert please clarify that 'pay in lieu of notice' amounts when paid out for a redundancy should be included for tax free consideration, along with the severance payment, up to the ATO’s prescribed tax free limit, based on years of service.
I am specifically asking for clarification on 'pay in lieu of notice' amounts paid in connection to an involuntary redundancy. The ATO says this "may" be included, depending on your employment conditions.
My situation is: I am age 49 and I was made redundant this month. I was paid out my notice and terminated on the spot. I did not resign. I did not work during the notice period. I was paid 5 weeks in lieu of notice and 4 weeks redundancy (total 9 weeks). I worked for a large national company.
My employer has taxed the entire 5 week notice payment at 32%, rather than include 'pay in lieu of notice' amount as an eligible redundancy payment. It is my understanding that, specifically in relation to the 'pay in lieu of notice' amount, I should have only been taxed on the amount over and above my prescribed tax free limit, because the 'pay in lieu of notice' was part of a redundancy and in consequence of my termination of employment.
Depending on your employment conditions, a genuine redundancy payment may include:
When I asked my employer to correct this, I received this reply from them (in italics):
And also I received this reply from my employer in italics (after their payroll manager reviewed this matter also):
"When referring to the ATO website, it is stated that Payment in Lieu of Notice may be included in a genuine redundancy payment depending on your employment conditions and also refers us to TR2009/2 for guidance.
Tell us about your ATO Community experience and help us improve it for everyone.Provide feedback