Summary

Employee Termination Payment Summaries makeup records are created when you save the Employee Terminations record or when you upgrade to the release version that includes Employee Termination Payment Summaries.

Notes

After you process and close the termination pay, the Notes tab shows how the ETP was calculated. You can copy (Ctrl+C) and paste (Ctrl+V) this information into other applications. You can also see this information in Transaction View - Proposed Changes (View menu) after you process the employee's termination.

Note: If the ETP has been superseded by an adjustment, you need to press Ctrl+Enter to open the Employee Termination Payment Summaries makeup record.

Example: ETP Tax Calculations

After 6 years' service Brent who is aged 48 is made redundant and receives the following payments in his termination pay:

Redundancy pay: $40,000.00

Unused sick leave: $6,924.80

Unused annual leave: $10,865.76

Unused long service leave: $10,966.15

Gratuity: $100,000.00

Brent had previously received $74,998.50 in other taxable payments during the financial year.

His termination pay will be taxed as follows:

Step

Action

Result

1

Calculate genuine redundancy payment

The redundancy payment:
$40,000

$40,000

2

Calculate tax-free limit on genuine redundancy payment

The tax-free amount in 2012-13 is $8,806 + $4,404 for each completed year of service. Brent has 6 years of completed service:
$8,806 + (6 x $4,404)

$35,230

3

Calculate taxable component of genuine redundancy payment

This is the genuine redundancy payment from step 1 less the tax-free limit amount from step 2:
$40,000 - $35,230

$4,770

ETP code R

Under ETP cap so taxed at 31.50%

4

Calculate tax on taxable component of genuine redundancy payment

ETP cap for 2012-13 = $175,000

Taxable component of genuine redundancy payment = $4,770

Under ETP cap so taxed at 31.50%

$1,502.55

5

Calculate the remaining ETP Cap

This amount is the ETP cap ($175,000 for 2012-13) less the taxable component of the excluded ETP (from step 3):
$175,000 - $4,770

$170,230

6

Calculate non-excluded payment

The non-excluded payment is the gratuity + sick leave:
$100,000.00 + $6,924.80

$106,924.80

ETP code O

7

Calculate the whole-of-income cap

Whole-of-income cap ($180,000) less other taxable income:
$180,000 - $74,998 (salary and wages) = $105,002

The cap is further reduced by the taxable payments for unused annual and long service leave:
$105,002 - ($10,865.76 + $10,966.15) = $83,170

The cap is also reduced by the taxable component of the excluded ETP (from step 3):
$83,170 - $4,770

$78,400

(Calculated whole-of-income cap)

8

Determine which cap is lower

Brent will receive the lower of the remaining ETP cap or the whole-of-income cap:

Remaining ETP cap (from step 5) = $170,230

Calculated whole-of-income cap (from step 7) = $78,400

The whole-of-income cap will apply to Brent's non-excluded payments because the cap is lower than the remaining ETP cap.

$78,400

(Calculated whole-of-income cap is the lower cap)

9

Apply calculated whole-of-income cap to non-excluded payment

Non-excluded ETP less calculated whole-of-income cap:
$106,924.80 - $78,400 = $28,524.80

$78,400 of the total non-excluded ETP is below the whole-of-income cap and will be taxed at 31.5%:
$24,696

The remaining $28,524.80 is above the whole-of-income cap and will be taxed at the highest marginal rate (46.5%):
$13,264

$37,960

(Total tax withheld for ETP)