Retrenchment payments and taxation

When you are retrenched you will receive information about your retrenchment payments from both your employer and Telstra Super.

When you are retrenched you will be entitled to:

  • A superannuation retrenchment benefit from Telstra Super
  • Employer retrenchment payments.

Superannuation retrenchment benefit

Your superannuation retrenchment payment may contain one or more of the following components: preserved super, restricted non-preserved super, unrestricted non-preserved super .Your super benefit also consists of two tax components - a tax-free component and a taxable component.

Taxation of the taxable component of a super benefit
Age Tax on taxable component
Under preservation age* 20%
Between preservation age* or older

First $195,000 tax-free.

Over $195,000 taxed at 15%.

60 plus Tax-free

* Current preservation age.
On the last day of the financial year in which the payment was made.
Plus Medicare levy (if applicable).

Employer payments

Your employer retrenchment payment is made up of a number of components which are taxed in different ways. Your employer will provide you with an Employment Termination Payment. This document will detail the retrenchment payments to which you are entitled. Your payment may contain the following:

  • Employment Termination Payments (ETPs)
  • other employer redundancy payments.
Employment Termination Payments (ETPs)

ETPs (including bona fide redundancy payments over the tax-free limit) consist of a tax-free component and a taxable component. Amounts that may be included in an ETP are:

  • bona fide redundancy payments over the tax-free limit
  • unused rostered days off and sick leave
  • payments in lieu, gratuities, compensation payments for loss of employment.
Taxation of the taxable component of an ETP
Age Tax on taxable component
Under preservation age*

First $195,000 taxed at 30%.

Preservation age* or older

First $195,000 taxed at 15%.

 All ages
Above $195,000 taxed at 45%.

* Current preservation age.
On the last day of the financial year in which the payment was made.
Plus Medicare levy (if applicable).

Other employer redundancy payments

Other payments you may receive upon retrenchment include:

  • bona fide redundancy payments within the tax-free limit
  • unused annual and long service leave salary and wages owed to you.

Leave that is not considered an ETP as a result of a retrenchment is taxed at concessional rates .

Taxation of other employer redundancy payments for the 2015/2016 financial year
Annual leave 100% of lump sum is taxed at 30%(maximum).
Long service leave accrued before 16 August 1978 5% included in assessable income and taxed at your Marginal Tax Rate.
Long service leave accrued after 15 August 1978 100% included in assessable income and taxed at 30% (maximum).
Bona fide redundancy payments
These payments are tax-free to a limit and cannot be rolled into super. The amounts are indexed to AWOTE each July.
Tax-free limit is $9,780 plus $4,891 for each complete year of service with your employer.
Amounts in excess of the tax-free limit are treated as an ETP.

Plus Medicare levy (if applicable).