Summary

The employer needs to decide if any part of the lump sum payment is an ETP. Only certain employee termination payments are ETPs and they are taxed differently from other termination payments.

The following table shows which employee termination payments can be included in ETPs.

(Source: http://www.ato.gov.au/individuals/PrintFriendly.aspx?ms=individuals&doc=/content/00325608.htm).

ETP

Non-ETP

Gratuities

Accrued leave payments

Severance pay

Payments below the genuine redundancy tax-free limit

Non-genuine redundancy payments

Salary and wage income

Payments in lieu of notice of termination

Super benefits (for example, a lump sum or income stream from a super fund)

Compensation payments from employment and other disputes

Foreign termination payments

Payments because of invalidity or death of the employee

Certain payments for restraint of trade

Amounts more than the genuine redundancy limits.

Certain payments for personal injury if you are compensated for your inability to be employed