Schedule Sch 11 - Taxation Administration Act Withholding Schedules 2015 - – Tax table for employment termination payments

Schedule 11 – Tax table for employment termination payments

This document is a withholding schedule made by the Commissioner of Taxation in accordance with sections 15-25 and 15-30 of Schedule 1 to the Taxation Administration Act 1953 (TAA). It applies to withholding payments covered by paragraph 12-85(b) of Schedule 1 to the TAA.

You should use this table if you pay an individual an amount that is either:

■ an employment termination payment (ETP)

■ a delayed termination payment – that is, a payment that would be an ETP except it was paid more than 12 months after the relevant termination of employment (for more information, see Delayed termination payments).

For information about ETP’s for employers and employees, refer to Taxation of termination payments.

Employment termination payments

An ETP is a lump sum payment you make under either of the following circumstances:

■ to an employee when their employment is terminated (referred to as a 'Life benefit' ETP)

■ to an employee’s estate because their employment has been terminated due to death (referred to as a 'Death benefit' ETP).

ETPs include lump sum payments paid upon resignation, retirement or death. A payment from a super fund is not an ETP.

A payment must generally be made within 12 months of termination to qualify as an ETP. A payment made outside 12 months is a delayed termination payment, unless we have given approval for the payment to be treated as an ETP.

Tax treatment of ETPs

ETPs can comprise of two different components:

■ Tax free component

■ Taxable component.

You only withhold from the taxable component.

Depending on the type of ETP, the concessional tax treatment may be limited to the smaller of:

■ the ETP cap, or

■ the whole-of-income cap.

The top rate of tax applies to amounts paid in excess of these caps.

The ETP cap amount for the 2015-16 income year is $195,000. This amount is indexed annually.

The whole-of-income cap amount for the 2015-16 income year is $180,000. This amount is not indexed. This cap is reduced by the other taxable payments that your employee receives in the income year. For example, salary or wages that you have paid to your employee.

In some cases, you may need to include an ETP in the taxable payments when working out the whole-of-income cap.

Refer to Taxation of termination payments.

<table cellspacing="0" cellpadding="0" style="border:0.75pt solid #000000; border-collapse:collapse"><tbody><tr><td style="width:108pt; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Income component derived by your employee in the income year</td><td style="width:74.25pt; border-right:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Age of person at the end of the income year that the payment is received</td><td style="width:67.2pt; border-right:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Component subject to PAYG withholding</td><td style="width:61.75pt; border-right:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Rate of withholding</td><td style="width:44.2pt; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Cap to apply</td></tr><tr><td rowspan="3" style="width:108pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Life benefit ETP – taxable componentPayment is because of:■ early retirement scheme■ genuine redundancy■ invalidity■ compensation for personal injury, unfair dismissal, harassment or discrimination.</td><td style="width:74.25pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Under preservation age</td><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Up to the ETP cap amount<a href="#footnoteone" style="text-decoration:none">1</a></td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">32%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">ETP cap</td></tr><tr><td style="width:74.25pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Preservation age or over</td><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Up to the ETP cap amount<a href="#footnoteone" style="text-decoration:none">1</a></td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">17%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">ETP cap</td></tr><tr><td style="width:74.25pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">All ages</td><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Amount above the ETP cap amount<a href="#footnoteone" style="text-decoration:none">1</a></td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">49%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">ETP cap</td></tr><tr><td rowspan="3" style="width:108pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Life benefit ETP – taxable componentPayment is:■ a ‘golden handshake’■ non-genuine redundancy payment■ severance pay■ a gratuity■ in lieu of notice■ for unused sick leave■ for unused rostered days off.</td><td style="width:74.25pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Under preservation age</td><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Up to the relevant cap amount</td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">32%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Smallest of ETP cap and whole-of-income cap<a href="#footnotetwo" style="text-decoration:none">2</a></td></tr><tr><td style="width:74.25pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Preservation age or over</td><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Up to the relevant cap amount</td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">17%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Smallest of ETP cap and whole-of-income cap<a href="#footnotetwo" style="text-decoration:none">2</a></td></tr><tr><td style="width:74.25pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">All ages</td><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Amount above the relevant cap amount</td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">49%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Smallest of ETP cap and whole-of-income cap<a href="#footnotetwo" style="text-decoration:none">2</a></td></tr><tr><td rowspan="2" style="width:108pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Death benefit ETP paid to non-dependants – taxable component<a href="#footnotethree" style="text-decoration:none">3</a></td><td rowspan="2" style="width:74.25pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">All ages</td><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Up to the ETP cap amount</td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">32%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">ETP cap</td></tr><tr><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Amount above the ETP cap amount</td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">49%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">ETP cap</td></tr><tr><td rowspan="2" style="width:108pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Death benefit ETP paid to dependants – taxable component<a href="#footnotethree" style="text-decoration:none">3</a></td><td rowspan="2" style="width:74.25pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">All ages</td><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Up to the ETP cap amount</td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Nil</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">ETP cap</td></tr><tr><td style="width:67.2pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Amount above the ETP cap amount</td><td style="width:61.75pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">49%</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">ETP cap</td></tr><tr><td style="width:108pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Death benefit ETP paid to a trustee of a deceased estate<a href="#Footnote4" style="text-decoration:none">4</a></td><td style="width:74.25pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-left:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"></td><td style="width:67.2pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-left:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"></td><td style="width:61.75pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-left:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top">Nil</td><td style="width:44.2pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"></td></tr></tbody></table> ```

Column 1ETP cap only applies to:	Column 2Smaller of the ETP cap and whole-of-income cap applies to:
a payment made under an early retirement scheme that exceeds the tax-free limit* (only the amount in excess of the limit is an ETP).	a ‘golden handshake’ whether paid under:■ contract■ industrial award obligation■ recognition of prior service.
a genuine redundancy payment that exceeds the tax-free limit* (only the amount in excess of the limit is an ETP).	a non-genuine redundancy payment.
a payment made because of the employee’s permanent disability.	severance pay.
compensation payment for personal injury.	a gratuity.
compensation for unfair dismissal.	a payment in lieu of notice.
compensation for harassment.	a payment for unused sick leave.
compensation for discrimination.	a payment for unused rostered days off.
lump sum payments paid on the death of an employee.	an ETP not covered in column 1.

Step	Action
1	Add up all taxable payments you made to your employee (excluding the ETP).
2	Subtract the step 1 result amount from $180,000.
3	The result from step 2 is the calculated whole-of-income cap.
4	Compare the calculated whole-of-income cap from step 3 and the ETP cap amount of $195,000 for 2015-16 (or the balance of ETP cap if a payment component has already applied to the ETP cap where there has been multiple payments for the same termination).
5	If both caps are equal, use the whole-of-income cap. The smallest of the two caps at step 4 is the cap to apply to the ETP taxable component.

Step	SmallBiz action	Result
1	Adds up all taxable payments (excluding the ETP) paid to Jane.	$84,000
2	Subtracts the step 1 amount from $180,000. This is the calculated whole-of-income cap.	$96,000
3	Determines the smallest cap by comparing result from step 2 against ETP cap amount of $195,000.	Whole-of-income cap is smallest
4	Uses table A to determine withholding rate on amounts up to calculated whole-of-income cap of $96,000 remembering Jane is under preservation age.	32%
5	Uses table A to determine withholding rate on amounts above the whole-of-income cap of $96,000. As whole $8,000 ETP is under cap, no further calculation is required.	Nil

Step	MediumBiz action	Result
1	Adds up all taxable payments (excluding the ETP) paid to Chris.	$100,000
2	Subtracts the step 1 amount from $180,000. This is the calculated whole-of-income cap.	$80,000
3	Determines smallest cap by comparing result from step 2 against ETP cap amount of $195,000.	Whole-of- income cap is smallest
4	Uses table A to determine withholding rate on amounts up to calculated whole-of-income cap of $80,000 remembering Chris is under preservation age.	32%
5	Uses table A to determine withholding rate on amounts over the calculated whole-of-income cap of $80,000. ETP $100,000 less cap amount $80,000, gives $20,000 over the cap.	49%

Step	MacroBiz action	Result
1	Adds up all taxable payments, salary and wages paid to Alec.	$140,000
2	Subtracts the step 1 amount from $180,000. This is the calculated whole-of-income cap.	$40,000
3	Determines smallest cap by comparing result from step 2 against ETP cap of $188,557 (ETP cap $195,000 for 2015-16 less the $6,443 ETP).	Whole-of-income cap is smallest
4	Uses table A to determine withholding rate on amounts up to calculated whole-of-income cap of $40,000 remembering Alec is under preservation age.	32%
5	Uses table A to determine withholding rate on amounts over the calculated whole-of-income cap of $40,000. As the $25,000 gratuity is under the cap, no further calculation is required.	Nil

Sch 11– Tax table for employment termination payments

Get a plain-English read of Sch 11

Code	Description
R	ETP because of:■ early retirement scheme■ genuine redundancy■ invalidity or■ compensation for:– personal injury– unfair dismissal– harassment– discrimination
O	Other ETP not described by R, for example, golden handshake, gratuity, payment in lieu of notice, payment for unused sick leave, payment for unused rostered days off.

Code	Description
S	This is a code R payment and you made one of the following payments to your employee in a previous income year for the same termination:■ a code R payment■ a code O payment■ a transitional termination payment.
P	This is a code O payment and you made one of the following payments to your employee in a previous income year for the same termination:■ a code R payment■ a code O payment■ a transitional termination payment.

Code	Description
D	Death benefit ETP paid to a dependant of the deceased
B	Death benefit ETP paid to a non-dependant of the deceased and you made a termination payment to the non-dependant in a previous income year for the same termination
N	Death benefit ETP paid to a non-dependant of the deceased
T	Death benefit ETP paid to a trustee of the deceased estate