Document ID: chunk:federal_register_of_legislation:F2024L00664:schedule:11:p2
Version: federal_register_of_legislation:F2024L00664
Segment Type: schedule
Provision Reference: sch 11 (pt 2/4)
Character Range: 206537–210809

lists the types of ETPs that are subject to withholding and the applicable cap for each type of payment.

For payments in column 2, both caps are considered, and the smaller cap applies. Withholding will be required to be made at the top rate of tax on the amount over the smaller of the two caps.

Applicable caps for ETPs subject to withholding
Column 1                                                                                                                                                                       Column 2
  ETP cap only applies to:                                                                                                                                                     Smaller of the ETP cap or whole-of-income cap applies to:
                                                                                                                                                                               a 'golden handshake' whether paid under:

                                                                                                                                                                                   * contract
a payment made under an early retirement scheme that exceeds the tax-free limit (see Note 1) – only the amount in excess of the limit is an ETP                                    * industrial award obligation
                                                                                                                                                                                   * recognition of prior service

a genuine redundancy payment that exceeds the tax-free base limit and for each complete year of service limit (see Note 1) – only the amount in excess of the limit is an ETP  a non-genuine redundancy payment
a payment made because of the employee's permanent disability                                                                                                                  severance pay
compensation payment for personal injury                                                                                                                                       a gratuity
compensation for unfair dismissal                                                                                                                                              a payment in lieu of notice
compensation for harassment                                                                                                                                                    a payment for unused sick leave
compensation for discrimination                                                                                                                                                a payment for unused rostered days off
lump sum payments paid on the death of an employee.                                                                                                                            an ETP not covered in column 1.

Note 1: The tax-free base limit for the 2024-25 income year is $12,524 plus $6,264 for each completed year of service.

Steps to work out smallest cap

Follow these steps to work out the smaller of the ETP cap and whole-of-income cap:

   1. Add up all taxable payments you made to your employee (excluding the ETP).
   2. Subtract the step 1 result amount from $180,000.
   3. The result from step 2 is the calculated whole-of-income cap.
   4. Compare the calculated whole-of-income cap from step 3 and the ETP cap amount of $245,000 for 2024-25 (or the balance of ETP cap if a payment component has already applied to the ETP cap where there have been multiple payments for the same termination).
   5. If both caps are equal, use the whole-of-income cap. The smaller of the two caps at step 4 is the cap to apply to the ETP taxable component.

Multiple payments for same termination

For various reasons, ETPs may be made in more than one instalment. Payments made after the initial payment subject to the ETP cap, will attract a lower ETP cap. This is because the cap amount is reduced by the amount of all previous payments for the same termination.

Lump sum payments that are not ETPs may also be subject to PAYG withholding. Use the applicable tax table