Are you expecting a redundancy payment - changes to taxation on 1 July 2012 may affect you
If you are expecting a redundancy payment before 30 June 2012 you should be aware that new tax implications that will apply from 1 July 2012. The changes involve the abolishment of significant tax concessions by contributing your redundancy payment to superannuation.
In 2006 rules were introduced allowing an employment termination payment (ETP) to be contributed directly to a superannuation fund provided that it meets certain conditions. This also involved the ETP being classified as a transitional ETP – this means that the person being paid the ETP has been employed under the same employment contract or workplace agreement since the rules were introduced in May 2006.
With the changes being introduced by the government, anyone covered by this transitional rule and who is expecting a redundancy payment should make sure that they receive their payment prior to 30 June 2012 to take advantage of the significant tax concessions.
If your employment contract has changed since May 2006, you are not covered by this transitional rule and therefore you will not be able to contribute your ETP directly to your super.
Current tax rules for ETPs received up to 30 June 2012
Age up to 55 Payment up to $165,000 tax rate 31.5%
Payment over $165,000 tax rate 46.5%
Age 55 and over First $165,000 tax rate 16.5%
Remainder after $165,000 tax rate 46.5%
The government has not announced their changes to the tax rules surrounding ETPs from 1 July 2012, but it is a timely reminder to those of you who fall under the transitional rule and you want to contribute your ETP to your super to do so before 30 June 2012 to take advantage of the current tax concessions.
If you would like any further advice or information regarding ETPs please do not hesitate to contact us.Back