We have had a few calls on the effect that the age of the employee has on the tax treatment of entitlements due on redundancy.
The following table summarises the requirements:
|
Age |
Tax-free amount available |
Treatment of any ETP |
Leave entitlements |
|
65 or over at date of termination |
No (must be under 65 to be treated as genuine redundancy for tax purposes) |
16.5% (on up to $165,000) of the taxable life benefit ETP |
Taxed the same as for non-concessional terminations |
|
Under 65 at date of termination but 55 or over at the end of the income year |
Yes (usual calculation with tax-free limit based on completed years of service) |
16.5% (on up to $165,000) of the taxable life benefit ETP |
Maximum tax rate of 31.5% (age 55 rule does not change this)
|
|
Under 55 at the end of the income year |
Yes (usual calculation with tax-free limit based on completed years of service) |
31.5% (on up to $165,000) of the taxable life benefit ETP |
Maximum tax rate of 31.5% |
Note that the age 65 requirement is at the date of termination while the age 55 rule is the age at the end of the income year.
Information provided by Thomson Reuters.