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Income tax paid on accrued income

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Consider someone who were to leave their job half-way through the financial year and go travelling for 6 months (so they don’t earn any income for the second half of the financial year).

If they were to have their accrued annual leave cashed out (i.e. 8 weeks), is it correct that tax will be withheld at one’s marginal tax rate? Then, at the end of the financial year, the leave payout is treated no differently from any other income?

 

I have seen information that suggests that this leave will be taxed at 30% at the end of the FY. Or is this only the withholding rate, and the leave is actually lumped together with all other income when the tax return is completed?

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Anonymous

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You are correct when you say the annual leave is just taxed at your marginal rate of tax, and treated the same as any other income for the financial year and makes up part of your taxable income.

 

If however you were termintated from your position then the accrued annual leave would be taxed at a different rate, pls refer here  https://www.ato.gov.au/Rates/Schedule-7---Tax-table-for-unused-leave-payments-on-termination-of-empl...

 

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Best answer

ATO Certified

Anonymous

Replies 0

You are correct when you say the annual leave is just taxed at your marginal rate of tax, and treated the same as any other income for the financial year and makes up part of your taxable income.

 

If however you were termintated from your position then the accrued annual leave would be taxed at a different rate, pls refer here  https://www.ato.gov.au/Rates/Schedule-7---Tax-table-for-unused-leave-payments-on-termination-of-empl...

 

ATO individual hot line 13 28 61

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