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PAYROLL-Termination Pays 2013/2014 (May 2014) __________________________________________________________________________________________

© The Institute of Certified Bookkeepers

Termination Pays

Table of Contents

Terminations ............................................................................................................... 2

Types of Terminations ....................................................................................................................... 2

Notice Period of Termination ............................................................................................................. 2

Redundancy Weeks to pay ................................................................................................................ 3

What’s included in a Termination? ..................................................................................................... 3

Employment Termination payment (ETP) ................................................................. 4

ETP Categories ................................................................................................................................. 4

Types of ETP’s .................................................................................................................................. 4

Payment Summary Codes for ETP .................................................................................................... 5

Tax on Terminations ................................................................................................... 5

Tax Treatment on non-ETP ............................................................................................................ 6

Tax Treatment on ETP ................................................................................................................... 8

Tax on In lieu of Notice and Redundancy Bundle........................................................................... 8

Preservation Age ............................................................................................................................ 9

ETP Cap Limits .............................................................................................................................. 9

Terminations Process .............................................................................................. 11

Step 1 – Process Normal Pay first ................................................................................................ 11

Step 2 – Determine Type of Termination and what is included .................................................... 11

Step 3 – Determine Entitlements to pay ....................................................................................... 12

Step 4 – Setup Additional Payroll Categories for Termination ...................................................... 12

Step 5 – Calculate Tax ................................................................................................................. 12

Step 6 – Process Termination in Payroll and SGC on Terminations ............................................ 12

Step 7 – Terminate Employee and provide ETP if required ......................................................... 12

Examples of Termination ......................................................................................... 13

Genuine Redundancy with Gratuity and Entitlements .................................................................. 13

Resignation with Entitlements of Annual Leave and LSL ............................................................ 14

Redundancy and In Lieu of Notice Bundle .................................................................................. 15



Employee Terminations Termination pays will be different according the circumstances involved, we recommend to always check the award or workplace agreement of the employee and the National Employment Standards. They can be straight forward such as where the employee resigns and gives notice and they are simply paid out any unused annual leave or unused long service leave. Terminations are more complex where it involves a member retiring, death, dismissal or redundancy; these situations may involve an “eligible termination payment” or ETP.

Types of Terminations

Resignation

Retirement – employee reaches a certain age though employer cannot force retirement in the current law

Invalidity – terminates employment due to ill health (employee must have 2 medical certificates to prove invalidity)

Abandonment – employee does not return to work and provides no explanation. After 3 days of no contact it is considered resignation without notice

Dismissal o Dismissal with notice – employers must give minimum period of notice o Summary dismissal – employee dismissed on the spot for serious misconduct o Constructive dismissal – employee resigns after threat of dismissal

Fixed Term Contract – contract ends

Redundancy – employee’s position is no longer required by the employer

Early Retirement Scheme – employers offer employees incentives to retire early or to resign due to reorganising the business. The scheme must meet 3 conditions:-

1. Scheme is available to a broad group of employees 2. Scheme is implemented due to reorganising the business 3. Scheme is approved by the Commission of Taxation

Notice of Termination If an employer is terminating an employee’s employment, proper written notice must be given and the period of notice is dependent on the period of service. The below table outlines the minimum period of notice required.

Period of Service Period of Notice

Not more than 1 year 1 week

More than 1 year but not more than 3 years 2 weeks

More than 3 years but not more than 5 years 3 weeks

More than 5 years 4 weeks

Note: If employee is over 45 years and worked at least 2 years of continuous service, add another week to period of notice

Payment in Lieu of Notice is an option for the employer rather than the employee working out the compulsory period of notice outlined above. Payment in Lieu of Notice must be at the full rate of pay for the hours the employee would have worked had the employment continued until the end of the minimum notice period.



Weeks of Redundancy Pay It is very important to check the award and/or the workplace agreement that the employee is engaged under. You will also need to check whether there is a transitional arrangement in place between the old award and the new modern award. If so, the employee must be paid at whichever is the higher rate. For example, an old award may have allowed for a higher rate of severance pay than does the current modern award. If the transitional arrangement is in place until the 31st December 2014, and the employee is made redundant before that date, then the redundancy must be paid as per the old award. Many modern awards only provide for redundancy pay as per the National Employment Standards, (NES). The table below shows the minimum payable as per the NES. Some awards or agreements provide for several weeks’ severance pay per year of service without imposing any cap, however the NES imposes a cap of 12-16 weeks’ pay depending on years of service. (After 10 years’ service it is expected that the employee would be owed Long Service Leave, hence the lower rate of redundancy pay).

Employee’s period of continuous service with the employer on termination Redundancy Pay

At least 1 year but less than 2 years 4 weeks

At least 2 years but less than 3 years 6 weeks








At least 10 years 12 weeks

Termination Pay Includes Unused annual leave – up to the last day at work

Annual leave loading - if annual leave loading is normally paid then include in termination pay (refer to modern award or enterprise agreement)

Long service leave – see state by state LSL rules

Redundancy / severance pay

RDOs (rostered days off) – any RDOs unpaid must be paid out at termination

Pay in lieu of notice

Golden handshake – used for highly ranked executives

Unused personal leave – only if stipulated in the modern award or workplace agreement



Employment Termination Payments An employment termination payment (ETP) is a lump sum payment made to an employee on termination in certain conditions. ETP categories:

Genuine redundancy payments in excess of the tax free amount

Non-Genuine redundancy payment, where…. o A redundancy can be genuine from the business point of view (eg the position is

genuinely redundant), but the ATO might deem it to be a non-genuine redundancy for tax purposes because the employee is aged 65 or older. In such a case the employee receives all the gross pay of a normal redundancy, but the taxation is that of a dismissal. The one exception in the taxation is that the ‘severance’ pay, being an ETP for non-genuine redundancy, is a code “R” ETP. (A normal dismissal ETP would be code “O”.)

o An employee resigns and a few days later the company announces redundancies, with

his position being one of them. The company offers the resigning employee their full redundancy pay. It cannot be taxed as a genuine redundancy. The ‘severance’ pay would be a code “O” ETP.

o An employee is on a fixed term contract and at the end of their contract, rather than

offering an extension or perhaps letting them go and employing someone else, they make the position redundant.

o An employer will sometimes make an employee “redundant” when in fact they should

have performance managed them

Unused rostered days off

Payments in lieu of notice

Ex-gratia or “golden handshakes”

Unused personal leave

Compensation for loss of job or wrongful dismissal

In order to qualify as an ETP, payment must be made within 12 months of termination date. Payments made outside 12 months should be taxed as ordinary income at marginal tax rates. Note that transitional arrangements for concessional taxing of ETP payments finished on 30 June 2012.

There are two type types of ETPs

1. Life Benefit Termination Payments – Is an ETP made to an employee in consequence of the termination of their employment for any reason other than death?

2. Death Benefit Termination Payments - Is an ETP made by an employer to a deceased employee's beneficiaries? It is received by a taxpayer after another person's death, in consequence of the termination of the other person's employment. It must be received no later than 12 months after the termination.



Payment Summary Codes for ETPs

ETPs require a separate payment summary to be issued within 14 days after termination and must be defined with the correct ETP codes as per below table.

LIFE BENEFIT ETP CODES

Code Description (See ETP caps page5)

R ETP made because of one of the following (Excluded ETPs) - Early retirement scheme - Genuine redundancy - Invalidity - Compensation for

Personal injury

Unfair dismissal

Harassment

Discrimination

O Other ETP not described by R (Non-Excluded ETPs) - Golden handshake, - Gratuity - Payment in lieu of notice - Payment for unused sick leave - Payment for unused rostered days off

Multiple Payments for Same Termination

S You made a Code R payment to your employee in a previous income year for the same termination

P You made a Code O Payment to your employee in a previous income year for the same termination

DEATH BENEFIT ETP CODES

Code Description

D Death benefit ETP paid to a dependent of the deceased

B Death benefit ETP paid to a non-dependent of the deceased and you made a termination payment to the non-dependent in a previous income year for the same termination

N Death benefit ETP paid to a non-dependent of the deceased

T Death benefit ETP paid to a trustee of the deceased estate

Tax Treatment of Terminations Tax treatment will depend on the type of termination and whether it is an ETP or not. The majority of non ETPs use the marginal rates to calculate tax whereas ETPs tax calculation differs. Tax on ETPs may comprise a tax free component and a taxable component. Tax free component will apply up to a limit for:

Termination due to ill-health (invalidity)

Commenced employment prior to July 1983, therefore pre-July 1983 employment is tax free

Genuine redundancy

Early retirement scheme



ATO NAT 70980 Tax Free Threshold Limit

2013-2014 tax-free limit

$9,246 plus $4,624 for each year of completed service.

Taxable Component – the remaining balance of the ETP after the tax free component is defined, is the taxable component.

Tax Treatment of Terminations Payment

The table below outlines the different components of a termination payment with their tax treatment and allocation on the payment summary.

TYPE: Resignations, Retirement and Dismissals

PAYG Tax Calculation Payment Summary Allocation

UNUSED ANNUAL LEAVE + LEAVE LOADING - Accrued up to 17/8/93 - Accrued from 18/8/93

All tax at 31.5% All taxed at marginal rates (Leave loading >$320)

Lump Sum Payment A Gross Payment

UNUSED LONG SERVICE LEAVE - Accrued up to 15/8/78 - Accrued from 16/8/78 to 17/8/93 - Accrued from 18/8/93

5% assessable taxed at marginal rates All Tax at 31.5% All taxed at marginal rates

Lump Sum Payment B Lump Sum Payment A Gross Payment

TYPE: Genuine Redundancy, Early Retirement Scheme and Invalidity


UNUSED ANNUAL LEAVE + LEAVE LOADING - All Payments

All tax at 31.5%

Lump Sum Payment A

UNUSED LONG SERVICE LEAVE - Accrued up to 15/8/78 - Accrued from 16/8/78

5% assessable taxed at marginal rates All Tax at 31.5%

Lump Sum Payment B Lump Sum Payment A

GENINUNE REDUNDANCY AND EARLY RETIREMENT SCHEME From 1/7/2013 Up to limit of $9246 + $4624 per completed year of services (if the payment is over the tax free amount, the excess is an ETP)

Tax Free

Lump Sum Payment D



Calculating Tax using Marginal Tax Rates

A quick method of determining the appropriate marginal tax is as follows; 1. Take normal annual salary and add termination pay to get new annual salary 2. Divide the new annual salary by 52 weeks to get the new weekly wage and determine

the difference between this tax and the normal tax (per week/fortnight/month) 3. Enter the new weekly wage amount. Note the tax payable for this new amount (either

from the software or ATO tax tables). 4. Deduct the normal weekly tax from the new amount determined above. 5. Multiply the tax difference by the number of pay periods to date. This is the amount of

tax that should be deducted from the employee’s termination pay.

(Example: Based on 2013 Tax Scales)

A Annual Salary (current) $52000

B Weekly Pay (current) $1000

C Hourly Rate (current) $26.32

D Annual Tax (current) $9256

E Tax per pay (current) $178

F Total tax to date as per Payroll System $4094

G Unused AL hrs 75.00

H Annual Leave amount payable (GxC) $1974

I Pay periods to date incl last pay 23

J Avg increase in pay per week with AL (H÷I) $85.83

K Revised average weekly pay (B+J) $1086

L Revised pay per annum (Kx52) $56463

M Revised tax per annum (Use Tax Scales) $10764

N Revised weekly tax (M ÷52) $207

FINAL PAY Normal $1000 Unused AL $1974

Total Gross $2974 Tax Deducted (N-E)xI $667

Net Pay $2307



Tax Treatment of Employment Termination Payment (ETP)

The table below outlines the different components of an ETP termination payment with their tax treatment and allocation on the payment summary.

EMPLOYMENT TERMINATION PAYMENTS (ETPS)


EMPLOYMENT TERMINATION PAYMENTS (ETP) - Invalidity Component - Pre 1/7/83 Component Post 1/7/83 Component Life Benefit ETP – Taxable Component for

Early Retirement Scheme

Genuine Redundancy

Invalidity

Compensation for injury, unfair dismissal, harassment or discrimination

Under preservation Age Preservation Age or over Life Benefit ETP – Taxable Component for

Golden Handshake

Non-Genuine Redundancy

Severance Pay

A gratuity

In lieu of notice* (See page 4)

Unused Sick Leave

Unused Rostered Days off

Under preservation Age Preservation Age or over Death Benefit ETP – Non Dependants Taxable Component* All Ages Death Benefit ETP – Dependants Taxable Component All Ages *Payments made to Trustee of deceased estate

Tax Free Tax Free ETP cap: 31.5% up to $180,000 then 46.5% 16.5% up to $180,000 then 46.5% Use smallest of ETP cap and Whole-of-income cap: 31.5% up to $180,000 then 46.5% 16.5% up to $180,000 then 46.5% ETP Cap: 31.5% up to $180,000 then 46.5% ETP Cap: Nil up to $180,000 then 46.5% No tax withheld by employer

ETP code “R” All ETP payments on ETP Payment Summary ETP code “O” ETP Payment Summary OR Lump Dum D ETP code “N” ETP code “D” ETP code “T”



Tax on Payment In Lieu of Notice when bundled with Genuine Redundancy Generally in lieu of notice payments are considered ETPs and would be included on the ETP payment summary except when bundled with a genuine redundancy. In this case, both the genuine redundancy and in lieu of notice payment are added together and included in the tax free portion up to the limit based on the number of years the employee has worked for their employer. This payment can be included at Lump Sum D on the regular payment summary. Its important to note that the in lieu of notice can ONLY be bundled to the genuine redundancy when the employee is seen to be disadvantaged when asked to leave immediately after being made redundant. The test is this: if the employee were to voluntarily resign, would they be required to work the notice period or would they have been paid in lieu of notice? If it can be demonstrated that it is likely the employee would be required to work the notice period, then the pay in lieu of notice can be Lump Sum D up to the relevant cap amount. The amount over the cap will be an ETP. For example, an administration employee would normally be required to work their period of notice. In this case, if the employee is made redundant and paid in lieu of notice, the payment can be part of Lump Sum D on the regular payment summary. If it is demonstrated that the employee would have been more likely to be paid in lieu of notice if they had resigned, the payment must remain an ETP. For example, salespeople are commonly asked to leave immediately upon resignation; therefore this employee being made redundant would have their in lieu of notice payment classified as an ETP.

Preservation Age used for ETP Tax on the taxable component for ETP will depend on the preservation age of the employee. Preservation age is generally the age that you can access your superannuation benefits. The preservation age is determined using the employee’s date of birth. The following table helps determine the preservation age.

Date of Birth Preservation Age

Before 1/7/1960 55

1/7/1960 - 30/6/1961 56

1/7/1961 – 30/6/1962 57

1/7/1962 – 30/6/1963 58

1/7/1963 – 30/6/1964 59

After 30/6/1964 60

ETP Caps (limits) On 1 July 2012, the concessional tax treatment for ETPs changed. For 2013-2014 the ETP cap and Whole-of-Income cap is $180,000. The taxable components of ETPs have a cap to decide the value of tax depending on the type of ETP and the age of the employee. There are two types of ETP caps: ETP cap (Type 1) which is indexed annually, which are called ‘EXCLUDED ETPs.



Whole-Of-Income cap (Type 2) which is not indexed, which are called ‘NON-EXCLUDED ETPs. Amounts paid in excess of these caps are taxed at the highest marginal rate (plus Medicare levy). The following table lists the types of ETPs subject to tax withholding and the applicable cap for each type of payment.

Type 1 - ETP cap only EXCLUDED-ETPS

Type 2 - Smaller of the ETP cap and Whole-of-Income cap – NON-EXCLUDED ETPS

Early Retirement Scheme that exceeds tax free limit (only the amount that exceeds the limit is an ETP)

Golden Handshake (either contract, award or recognition of service)

Genuine Redundancy that exceeds tax free limit (only the amount that exceeds the limit is an ETP)

Non-Genuine Redundancy (see page 3)

Payment made for permanent injury Severance Pay

Compensation for personal injury Gratuity

Compensation for unfair dismissal In lieu of Notice

Compensation for discrimination Unused Personal Leave/Sick Leave

Payment made for death of employee Unused Rostered Days off

The whole-of-income cap is determined by the salary the employee has already earned, therefore requires a few steps to calculate the cap.

Step 1 – Add all taxable payments (excluding NON-EXCLUDED ETPs) Step 2 – Subtract Step 1 value by ETP cap $180,000 determining new cap Step 3 – If new cap is lower than ETP cap of $180,000, then use the new cap Step 4 – Amounts less than the new cap are taxed at concessional rate, depending on the preservation age, and amounts above the new cap are taxed at the highest marginal rate.

Example 1: Type 1 – ETP cap ($180,000 for 2013/2014) Mary Jones had a serious accident at work resulting in permanent injury to her back. Her employer has agreed to a payout of $250,000 to compensate for her injury. Mary Jones is under the preservation age. Payout for permanent injury is considered an ETP cap Type 1, therefore the first $180,000 is taxed at 31.5% and then the remainder $70,000 is taxed at 46.5% Example 2: Type 2 – Choice of ‘smallest cap’ between ETP cap and Whole-of-Income cap Aidie Large, under preservation age, has been terminated. Wages to date are $50,000 and outstanding entitlements are $50,000. Aidie was also paid $120,000 as a ‘golden handshake’, which has no tax free component. Therefore, as the golden handshake is an ETP – Type 2, we are required to calculate the Whole-of-Income cap.

Step 1 Total taxable payments to date (excluding NON-EXCLUDED ETPs, ie wages and entitlements)

$100,000

Step 2 ETP cap $180,000 less Step 1 total $80,000

Step 3 Step 2 value is less than ETP cap therefore $80,000 becomes new cap



Step 4 Tax $80,000 at 31.5% rate $25,200

Step 5 Tax $40,000 ($120,000 golden handshake less $80,000 new cap) at 46.5% rate

$18,600

Step 6 Total tax payable = Step 4 + Step 5 $43,800

Example 3: Type 2 – Multi payments with both ETP cap and Whole-of-Income cap Billy, over preservation age, has been made redundant after 5 years. Termination payment of $70,000 includes $45,000 genuine redundancy and $25,000 gratuity. Wages to date are $140,000 and outstanding entitlements are $5,000. As the genuine redundancy holds a tax free portion and is classified as an ETP cap (excluded ETP) this must be dealt with first.

Step 1 Genuine redundancy amount over tax free limit ($45,000 – $32,366 ($9246+5yrsx$4624)

$12,634

Step 2 Billy is over preservation age and $12,634 is under $180,000 ETP Cap

Step 3 Tax on $12,364 at 16.5% $2,085

Gratuity payment of $25,000 is considered a non-excluded Whole-of-Income cap ETP, therefore the following steps are required.

Step 1 Total taxable payments to date (excluding non-excluded ETPs) $157,634 ($140,000 + $5,000 + $12,634-excluded ETP = taxable payments)

$157,634

Step 2 ETP cap $180,000 less Step 1 $22,366

Step 3 Step 2 value is less than ETP cap therefore $22,366 becomes new cap

Step 4 Tax on $25,000 non-excluded ETP up to new cap of $22,366 at 16.5% rate

$3,690

Step 5 Remaining gratuity of non-excluded ETP $2,634 taxed at 46.5% rate

$1,225

Step 6 Total tax payable = Step 4 + Step 5 $4,915

Termination Process

Step 1 – Process Normal Pay Process the employee’s normal pay first. This is recommended so their entitlement balances are updated before the termination pay. Step 2 –What Type of Termination and What is Included

Unused annual leave – calculate outstanding AL

Unused long service leave – calculate LSL and check if unpaid leave or LSL was taken over the employment service—refer to state LSL laws

ETP – Is it a genuine redundancy? If so, how much severance pay is required?

ETP – Is payment in lieu of notice involved?

ETP – Are there any unpaid RDOs? If so, how many days/weeks?

ETP – Does the award or agreement include unpaid personal leave on termination?



It is recommended when terminating an employee through payroll software that you have separate categories for each termination component. This allows each component to be either exempt from tax, not included in SGC superannuation calculations and flagged to be excluded or included on payment summaries. Some wage categories that may be required include:

ETP Genuine redundancy (wage type)* ETP In lieu of notice (wage type)* ETP Unused personal leave (wage type)* ETP Gratuity (wage type)* ETP Tax (wage type)** (enter as a negative value) *set up ETP wage categories to be exempt from PAYG withholding tax **it is important that the tax relating to an ETP is not included in the normal PAYG Withholding tax category. (See above schedule for tax on terminations). Note: All ETPs and ETP tax are to be included in W1 or W2 of the BAS.

Step 3 – Determine Entitlements Determine outstanding leave categories (i.e., unused annual, long service, personal if applicable, and rostered days off), either through the payroll software or manually. Online long service leave calculators exist for most states. Step 4 – Set Up Employee for Payroll Categories Add the required payroll categories such as unused AL or LSL and any ETP categories as determined in Step 2 to the employee’s file. Check the correct allocation or exemption of superannuation guarantee to each category. Step 5 – Calculate Tax Calculating tax depends on the reason for the termination and in most cases when recording a standard termination pay, it will be necessary to adjust the PAYG Withholding tax that the software calculates automatically. The tax will be calculated at either marginal rates or a flat rate, see above tables to determine type of calculation. You must manually calculate the tax amount applicable to each payroll category when processing a termination pay. Step 6 - Process Termination Pay Enter the number of hours in the unused annual leave category and then adjust the tax to the calculated amount in step 5. Check ICB Superannuation Document for SGC calculation on Terminations (Note: Unused annual, personal and long service leave is EXEMPT from superannuation) Enter amounts for ETP components. Remember to use the ETP tax category for these amounts. If an ETP is involved, produce the ETP payment summary and provide to the employee within 14 days of termination date. The regular payment summary is provided to the employee at the end of financial year Step 7 - Terminate Employee Enter the termination date in the employee’s payroll information. The termination date will be picked up by the software for the payment summary information. (Post ’93) Tax @ marginal rates

http://www.icb.org.au/out/23405/Superannuation%20-%20PDF



Examples of Termination nding is 4 weeks (Post ’93 a

EXAMPLE

GENUNINE REDUNDANCY AFTER 8 YEARS WITH LSL AND AL + GRATUITY $50000 200000 16666.67

JO STEVENS (OVER PRESERVATION AGE) 16666.667

DOB 15/07/1959 3846.1538 pre week

START DATE 1/07/2005

FINISH DATE 31/12/2013

REDUNDANCY 14 WEEKS 53,846 ANNUAL SALARY $200,000

TAX FREE PORTION 46,238 WEEKLY SALARY $3,846.15

OVER TAX FREE PORTION 7,608

Salary YTD $100,000

TYPE 1 - ETP CAP Tax YTD $33,306.00

7,608 16.50% 1,255 TAX

TYPE 2 - SMALLEST OF ETP CAP AND WHOLE OF INCOME CAP FOR GRATUITY

1. TAXABLE PAYMENTS YTD 7,608 (GROSS INCL YTD+LSL+AL+REDUNDANCY OVER LIMIT)

2. ETP CAP $180k 172,392

3. GRATUITY $50K =

4. 28564 16.50% 4,713 TAX

5. 21436 46.50% 9,968 TAX

PERIOD OF SERVICE 8yrs 6mths TERMINATION PAY

LSL 7.4 REDUNDANCY Tax FREE 46,238 LUMP SUM D

LSL x Gross Wage 28,462 REDUNDANCY ETP 7,608 ETP

UNUSED LSL 28,462 LUMP SUM A

AL @ 31/12/13 152 4 weeks UNUSED AL 15,385 LUMP SUM A

$15,385 GRATUITY 50,000 ETP

GROSS 147,692

GROSS TAX RATE

LSL 28,462 8,965 31.50% PAYGW TAX 24,902 PAYMENT SUMMARY

AL $15,385 4,846 31.50% ETP TAX 15,936 ETP

NET PAY 106,855

GENUNINE REDUNDANCY + GRATUITY + ENTITLEMENTS Jo Stevens was made redundant after 8 years from a Victorian business. Her termination included a ‘gratuity’ payment of $50,000. Award uses NES standards She started on 1/7/2005 and finished date is 31/12/13 Long Service Leave in weeks is 7.4 weeks (Post ’93) Tax @ marginal rates Annual Leave outstanding is 4 weeks (Post ’93 and No LL) @ marginal rates



RESIGNATION with AL and LSL Annie Mitchell has resigned from a Victorian business at which she has worked for 11 years, 5 months and 1 week She started on 13/7/2002 and finished date is 20/12/13 Long Service Leave in weeks is 9.9 weeks (Post ’93) Tax @ marginal rates Annual Leave outstanding is 4.43 weeks (Post ’93 and No LL) @ marginal rates

TERMINATION CALCULATION

ANNIE MITCHELL

START DATE 13/07/2002 Annual Salary $34,580

FINISH DATE 20/12/2013 Hourly Rate $17.50

Weekly Gross Wage $665 $665

WEEKS WORKED 11yrs 5mths 1wk Weekly Tax $69 $69

LSLeave 9.9

LSL x Gross Wage $6,583.50

ALeave @ 20/12/12 in hours 168.394 4.431421 weeks

$2,947

Calculation Gross Tax

Gross Wage thus far $17,419.45 1863 thus far

LSL $6,583.50

AL $2,946.90

NEW Total Gross $26,949.85

New Weekly Gross / 25 weeks $1,077.99 204 tax

NEW Tax to Date (25 x $204) $5,100.00

Less Tax thus far $1,863.00

TAX for LSL + AL $3,237.00

Payment Summary – All Gross Wage is W1

Unused Annual leave and Long Service Leave are not included in SGC Superannuation Calculations.

$34,580

$17.50

$665

$69



REDUNDANCY WITH IN LIEU OF NOTICE

JOHN WELLS aged 61 YEARS (OVER PRESEERVATION AGE)

START DATE 1/01/1979 1/07/1983 5.6 Annual Salary $80,000.00

FINISH DATE 1/01/2014 35 Hourly Rate $40.49

YEARS OF SERVICE = 35 Years Weekly Gross Wage $1,538.46

EMPLOYER PAYS SERVERENCE 4 WEEKS FOR EVERY YEAR OF SERVICE Weekly Tax $361.00

GENIUNE REDUNDANCY (GR) SGC SUPER?

4 weeks paid x 35 years service x weekly wage ($1538) $215,384.62 NO SGC

ATO Tax Free Portion = $9624 + ($4624 x 35 years ) $171,464.00 Lump Sum D

ETP Portion is th excess = $215384 less (GR and LON tax free) $40,843.69 ETP

ETP Tax Pre 1/7/83 Tax Free (50 months - 4 1/2 years ) $4,862.34 ETP Summary

ETP (TYPE 1) Tax Post 1/7/83 @ 16.5% up to $180,000 $35,981.35 ETP Summary

$5,936.92 tax portion of ETP

IN LIEU OF NOTICE (LON)

2 Weeks tax free $3,076.92 ETP Summary YES SGC

LONG SERVICE LEAVE 30.33

LSL less 10 weeks already taken 20.33

LSL x Gross Wage $31,276.92 Lump Sum A NO SGC

Tax at 31.5% as post 16/8/78 31.50% $9,852.23 Tax

Annual Leave Outstanding Hrs 160 4.21 weeks

AL x Gross Weekly Wage $6,477.73 Lump Sum A NO SGC

Tax at 31.5% $2,040.49 Tax

Summary for this pay Gross Tax

Geninue Redundancy + In Lieu of Notice $174,540.92 0 Lump Sum D

ETP Summary $40,843.69 $5,936.92 ETP Summary

Annual + Long Service Leave $37,754.66 $11,892.72 Lump Sum A

Total $253,139.27 $17,829.64

REDUNDANCY and IN LIEU OF NOTICE John Wells has worked for a NSW company for 35 years and has been made redundant due to resizing of the company. The company pays 4 weeks severence for every year of service and paying 2 weeks In Lieu of Notice. Annual Leave Outstanding is 4.2 weeks Long Service Leave is 30.3 weeks less 10 weeks already taken = 20.3 Genuine Redundancy is 4 weeks x 35 years x $1538

Note: A payment in lieu of notice is an Employment Termination Payment (ETP) and any payments which are ETPs

and meet the conditions for payment under a genuine redundancy are tax free up to a limit based on the number of years the employee has worked for their employer. In this case, the employment is being terminated under a Genuine Redundancy so the payment in lieu of notice (along with any genuine redundancy payment) will be tax-free up

to the limit and any amount over the limit will be the ETP and taxed at the applicable rate.



REDUNDANCY PAY FOR JOHN WELLS

PAYMENT SUMMARY FOR JOHN WELLS



ETP – EMPLOYMENT TERMINATION PAYMENT FOR JOHN WELLS

References: ATO Tax on ETP ICB Guide on Long Service Leave ICB Employee Termination Template ICB Superannuation Document

http://www.ato.gov.au/Rates/Schedule-32---Tax-table-for-employment-termination-payments/

http://www.icb.org.au/out/42029/Long%20Service%20Leave

http://www.icb.org.au/Resources/Payroll/Termination-Template

http://www.icb.org.au/out/23405/Superannuation%20-%20PDF

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