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Employment termination payments

Posted on Nov 15, 2015 by editor

An employment termination payment (ETP) is a lump sum payment an employer makes to employees when their employment is terminated.

Depending on the age of the employee, and the length of their employment, the amount of an ETP may be taxed at a different rate. An ETP may encompass a tax-free portion, a concessionally taxed portion and a taxed portion.

To be eligible for concessions and to qualify for a lower rate of tax, employers must make an ETP to an employee within 12 months of their termination. Otherwise, the entire amount will be included in the employee’s assessable income and taxed at marginal rates.

An ETP may include:

An ETP does not include:

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