18 May 2012

Federal Budget: Pay out Employment Termination Payments before June 30

The government has announced in the 2012/2013 budget that it will limit the availability of the employment termination payment ("ETP") offset.

Currently, the ETP tax offset ensures that ETPs up to the cap ($175,000 in 2012-13, indexed) are taxed at a maximum rate of 15% for those over preservation age, and 30% for those under preservation age.

From 1 July 2012, only that part of an affected ETP, such as a golden handshake, that takes a person's total annual taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset.  Amounts above $180,000 will be taxed at marginal rates.

Action needed before 30 June If an executive or other employee's employment is being terminated in the near future, consider taking the necessary steps before 30 June to utilise the lower tax rate. 

How M+K can help Please contact Rob Warnock or Chi-Yung Lee if you require tax advice in relation to ETPs.

National M+K Contacts: Victoria - Rob Warnock, Principal New South Wales - Tony Gooch, Principal Queensland - Stephan Gifford, Principal Tasmania - Audrey Mills, Principal