ETP Lump Sum Tax Offset

Employment Termination Payment (ETP)

An Employment Termination Payment (ETP) is a lump sum payment made because of the dismissal, redundancy, retirement, or death of an employee. An ETP includes amounts paid in lieu of the following:

  •  Notice or rostered days off
  •  Golden handshakes
  •  Invalidity payments (not personal injury)
  •  Death benefits payments
  •  Redundancy and early retirement scheme payments in excess of the tax-free components

 

Employment termination payments that fall under the concessional cap for the corresponding financial year are taxed as such. The offset is calculated by the ATO and is solely based on tax return information. The ETP tax offset is only eligible on the payment amount which falls below the concessional cap. Amounts above the cap are taxed at marginal rates.

The ETP tax offset ensures that the tax on ETPs up to the ETP cap is limited to:

  •  15% for those at or over preservation age
  •  30% for those under preservation age

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