Termination and Redundancy Pay

[Feziona1]

Hi There 

I am having to pay an employee a genuine redundancy. 

I have to pay the employee 4 weeks notice, 2 weeks time in leiu of notice and some unused leave.

Firstly I am wondering if the genuine redundancy is an ETP or a Lump Sum Part A payment and also whether the payment is tax free or taxed at a marginal rate. 

Also regards to the unused leave:

1) Is it classified as Lump Sum Part A

2) Are you required to pay loading as well?

3) Is super payable on this amount?

4) Is the tax rate 32% as per Schedule 7 of the ATO?

This is my first redundancy payment and all the research on this topic is very confusing.

Thanks very much

[Tracey_H · Accepted solution]

Hi @Feziona1 

Thanks for your post. Termination pays are very confusing but as we aren't tax agents we're not permitted to advise you on what the payments are classifed as or how they are to be taxed. I will give you some links to the ATO website that may help clarify things for you:

Payments that are ETPs 

Employment termination payments 

Tax table for ETPs 

Unused leave payments on termination 

These help articles will guide you through processing the termination in AccountRight:

Processing termination payments 

Terminate an employee in STP 

Please let me know if you need further help.

If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

[Feziona1]

Thanks Tracey

This is my first redudancy and it is very confusing.

This information was somewhat helpful as it helped fill in some of the missing links.

The term pay I am doing is not an ETP as per the ATO classification and it is a genuine redundancy.

I haven't been able to locate any areas on the ato website regarding classification of genuine redundancies.

Also I was wondering if payment in leui of notice if it is not worked is part of the redundancy pay and how it is taxed. Also finding it hard to obtain clarity on these questions.

Any reference points I can use for the above?

Thank you

[Tracey_H]

Hi @Feziona1 

Unfortunately, I can't give you specific advice on how to classify and tax those termination payments. The first link I gave above, Payments that are ETPs, has links to information on genuine redundancies. If you need more information you will need to contact the ATO, which I understand is very difficult at the moment. Your accountant/tax advisor may also be able to help.

If you need help recording the termination payment in your software, please don't hesitate to ask as I am happy to help.