Age Pension calculatorA payment is an employment termination payment if it is received by a taxpayer in consequence of the termination of their employment or after another person’s death, in consequence of the termination of the other person’s employment. It must generally be received no later than 12 months after the termination.
Key Topics
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Tax-free amount of genuine redundancy and early retirement scheme payments in 2024–25 $12,524 + ($6,264 x each complete year of service)
This amount is not subject to tax, and is not classified as an ETP.
The balance of the payment is an ETP and may be split into a tax-free and a taxable component. See ETPs – taxation of taxable component.
Age limit for genuine redundancy and early retirement
The age limit to receive concessional tax treatment on genuine redundancy and early retirement scheme payments has been extended from 65 to Age Pension age. Concessional tax treatment applies up to Age Pension age as long as the dismissal or retirement occurs on or after 1 July 2019 and an earlier age of compulsory retirement for the particular position does not apply.
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ETPs
include:ETPs
do not include:Unused rostered days off
Superannuation benefits
Payments in lieu of notice
Pensions or annuities
Unused sick leave
Unused annual leave payments
Gratuities or 'golden handshakes'
Unused long service leave payments
Payments because of the employee’s invalidity (permanent disability, other than compensation for personal injury)
An amount included in assessable income under an employee share scheme
Genuine redundancy payment or an early
retirement scheme payment in excess of the tax-free amountThe tax-free part of a genuine redundancy payment or an early retirement scheme payment
Compensation for loss of job
Foreign termination payments
Compensation for wrongful dismissal
A payment made by a company or trust of a CGT exempt amount under the retirement exemption
Payments for loss of future super payments
A payment that is an advance or a loan on arm’s length terms
Certain payments made on the death of an
employeeNote: the part of any amount above that is included in the tax-free component of a genuine redundancy payment or approved early retirement scheme payment, is not an ETP.
A payment that is deemed to be a dividend
A capital payment for personal injury
A capital payment in respect of restraint of
tradeA commutation of a pension to pay superannuation contributions surcharge
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In all cases, the tax-free component of an ETP is non-assessable, non-exempt income and is not subject to tax.
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Age Max rate of tax 2024–25 ETPs that are 'excluded payments'1
Over preservation age
First $245,0002
15%3
Above $245,0002
45%4
Under preservation age
First $245,0002
30%3
Above $245,0002
45%4
Whole-of-income cap5
Over preservation age
First $180,0006
15%3
Above $180,0006
45%4
Under preservation age
First $180,0006
30%3
Above $180,0006
45%4
1
Apply the ETP cap to 'excluded payments' (see ETPs that are excluded payments).
2
ETP cap amount for 2024–25 is $245,000 and is reduced by any earlier ETPs paid to the taxpayer in the same income year, and by any earlier ETPs for the same termination regardless of when they are paid to the taxpayer. The ETP cap is indexed to AWOTE in $5,000 increments.
3
A tax offset applies, so the taxpayer pays no more than the lower of their marginal rate and the maximum tax rate shown, to the extent that the taxable component is within the relevant cap.
4
Rates of 45% shown above are specified flat rates rather than maximum rates.
5
For ETPs that are not excluded payments, apply the lesser of the ETP cap and the whole-of-income cap. Unless there are multiple payments to the employee for the same termination, the whole-of-income-cap will generally be the lesser amount.
6
The whole-of-income cap is reduced by any other taxable payments other than the ETP (such as salary and the taxable components of earlier ETPs) received by the employee in the same income year. The $180,000 whole-of-income cap is not indexed.
For all non-zero tax rates, the Medicare levy may also apply.
Preservation age is assessed on the last day of the financial year.
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Life benefit ETPs that are excluded payments:
genuine redundancy payments that exceed the tax-free amount
early retirement scheme payments that exceed the tax-free amount
payments that would have been genuine redundancy or early retirement scheme payments had the employee not reached their Age Pension age or earlier mandated retirement age
invalidity payments (only the amount not included in the tax-free component is subject to the ETP cap)
compensation payments principally for personal injury, unfair dismissal, harassment or discrimination
Only the ETP cap is applied to excluded payments.
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Examples of life benefit ETPs that are not excluded payments golden handshakes and gratuities
non-genuine redundancy payments
payments in lieu of notice that would also be payable on voluntary termination
payments for unused sick leave or unused rostered days off that would also be payable on voluntary termination
For ETPs that are not excluded payments, the lesser of the ETP cap and the whole-of-income cap is applied.
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Death benefit ETP paid to Component Maximum rate of tax 2024–25 Dependant (any age)
First $245,0001
Not subject to tax
Above $245,0001
45%2
Non-dependant (any age)
First $245,0001
30%3
Above $245,0001
45%2
1
ETP cap amount for 2024–25 is $245,000 and is indexed to AWOTE in $5,000 increments.
2
Rates of 45% shown above are specified flat rates rather than maximum rates.
3
A tax offset applies, so the taxpayer pays no more than the lower of their marginal rate and the maximum tax rate shown to the extent that the taxable component is within the ETP cap.
The whole of income cap does not apply to death benefit ETPs.
The tax free component of a death benefit termination payment is non-assessable, non-exempt income.
For all non-zero tax rates the Medicare levy may also apply except where paid to the deceased employee’s estate.
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Type of payment Amount Maximum tax rate On resignation or retirement
Pre 16 August 1978 service
5%
Marginal tax rates
16 Aug 1978 to 17 Aug 1993
100%
30%
Balance of service
100%
Marginal tax rates
On genuine redundancy, invalidity or early retirement
Pre 16 August 1978 service
5%
Marginal tax rates
Balance of service
100%
30%
A tax offset applies, so the taxpayer pays no more than the lower of their marginal rate and the maximum tax rate shown.
For all non-zero tax rates, the Medicare levy may also apply.
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Type of payment Amount Maximum tax rate On resignation or retirement
Pre 18 August 1993 service
100%
30%
Balance of service
100%
Marginal tax rates
On genuine redundancy, invalidity or early retirement
All service
100%
30%
A tax offset applies, so the taxpayer pays no more than the lower of their marginal rate and the maximum tax rate shown.
For all non-zero tax rates, the Medicare levy may also apply.