When you're made redundant you'll receive information about your redundancy payments from your employer. Your payment will consist of up to three components:
- genuine redundancy payment (the tax free portion). Note if you're over aged 65, you're not eligible for a genuine redundancy payment and your entire payout will be treated as an ETP.
- an employment termination payment (ETP), and
- other redundancy payments.
Genuine redundancy payment
If you’re receiving genuine redundancy some (or all) of your payment will be tax free and received as cash. You cannot roll this into your super. The amounts are indexed to Average Weekly Ordinary Times Earnings (AWOTE) each July.
Note if you're over aged 65, you're not eligible for a genuine redundancy payment and your entire payout will be treated as an ETP.
Taxation of other employer redundancy payments for the 2018/2019 financial year
Tax-free limit is $10,399 plus $5,200 for each complete year of service with your employer. Amounts in excess of the tax-free limit are treated as an ETP.
Employment Termination Payments (ETPs)
When you leave your employer, you may be entitled to an ETP. ETPs (including genuine 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:
- genuine redundancy payments over the tax-free limit
- unused rostered days off and sick leave
- payments in lieu, gratuities, compensation payments for loss of employment.
You can't roll your ETP payment into your super. You can make an after-tax (non-concessional) contribution if you wanted to take advantage of the 15% tax rate on investment earnings in your super. Contribution caps apply.
Taxation of the taxable component of an ETP
Age Tax on taxable component Under Preservation age*† First $205,000 taxed at 32% Preservation age*or older† First $205,000 taxed at 17% All ages† Above $205,000 taxed at 47%
† On the last day of the financial year in which the payment was made.
Other redundancy payments
On leaving your employer as a result of a termination or redundancy, you may also be eligible to receive a range of other cash payments.
- genuine redundancy payments within the tax-free limit
- unused annual and long service leave salary and wages owed to you.
Leave that's not considered an ETP as a result of a redundancy is taxed at concessional rates.
Taxation of genuine redundancy payments for the 2018/2019 financial year
Annual leave 100% of lump sum is taxed at 32%† (maximum) Long service leave accrued before 16 August 1978 5% included in assessable income taxed at your Marginal Tax Rate† Long service leave accrued after 15 August 1978 100% included as assessable income and taxed at 32%† (maximum)
† Includes Medicare Levy (if applicable)
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