When employees terminate there are many things that need to be taken into consideration – one of them is the employee’s age.
Notice – Under the Fair Work Act 2009, when you give an employee notice (or pay them in lieu of providing notice) then employees who are over 45 years old and have at least 2 completed years of service need to be given an additional week of notice.
To determine whether an employee is over 45 years old, you must know the employee’s age at the date the notice to terminate their employment is given to them. If the employee is 44 on the day they were notified of their termination, then the additional week does not have to be provided even if the employee will turn 45 during the notice period (Section 117 of the Fair Work Act)
Employment Termination Payments – When an employee receives a post June ’83 ETP component , the payment is taxed at a lower rate when they are at their preservation age or over (currently 55 years or older though this will increase over time).
To determine whether an employee is 55 or older, you must know the employee’s age at the end of the financial year the payment is made in. If the employee is 54 at the payment date but will turn 55 before the end of the financial year the payment is made in, then the payment can be taxed at the lower rate subject to the particular ETP threshold applying. (Section 82-10(3)(a) of the Income Tax Assessment Act 1997)
Redundancy – When an employee’s position is made redundant any payment you make to them can usually be taxed in a concessional manner – this includes leave being paid on termination as well as the severance pay provided. However when an employee is 65 years of age or older then the tax concessions no longer apply (even those for the unused leave being paid).
To determine whether an employee is 65 or older, you must know the employee’s age on the date of their dismissal. If the employee has reached their 65th birthday prior to being dismissed, then the concessions do not apply. Note – if your employees are required to terminate their employment once they reach a particular age (which is less than 65), or complete a particular period of service, then the tax concessions will also not apply to these employees if their positions are made redundant after they have reached that age/time. (Section 83-175(2)(a) of the Income Tax Assessment Act 1997)
Approved Early Retirement Schemes – As with redundancy, the dismissal/”retirement” must happen before the day the employee turns 65 or an earlier date if required to terminate at a lesser age or completing a particular period of service (Section 83-180 (2)(a) of the Income Tax Assessment Act 1997)
Invalidity – the employment must stop before the person’s “last retirement day” (Section 82-150 (1)(c) of the Income Tax Assessment Act 1997)
“last retirement day” has the same meaning as it does for redundancy and approved Early Retirement Schemes:
(Section 995-1 of the Income Tax Assessment Act 1997)
last retirement day means:
(a) if an individual’s employment or office would have terminated when he or she reached a particular age or completed a particular period of service – the day he or she would reach the age or complete the period of service (as the case may be); or
(b) in any other case – the day on which he or she would turn 65.