Document ID: chunk:federal_register_of_legislation:C2007A00009:clause:2_1:p2
Version: federal_register_of_legislation:C2007A00009
Segment Type: clause
Provision Reference: sch 2 cl 1 (pt 2/11)
Character Range: 273550–276325

What this Division is about

      This Division tells you how employment termination payments are treated for the purpose of income tax.

Subdivision 82‑A—Employment termination payments: life benefits

Guide to Subdivision 82‑A

82‑5  What this Subdivision is about

      If you receive a life benefit termination payment, part of the payment may be tax free (the tax free component).
      You are entitled to a tax offset on the remaining part of the payment (the taxable component), subject to limitations.
      The extent of your entitlement to the offset depends on your age in the year you receive the offset, on the total amount of payments you receive in the same year, and on the total amount of payments you receive in consequence of the same employment termination.

Table of sections

Operative provisions

82‑10 Taxation of life benefit termination payments

Operative provisions

82‑10  Taxation of life benefit termination payments

Tax free component

 (1) The *tax free component of a *life benefit termination payment you receive is not assessable income and is not *exempt income.

Taxable component

 (2) The *taxable component of the payment is assessable income.

 (3) You are entitled to a *tax offset that ensures that the rate of income tax on the amount mentioned in subsection (4) does not exceed:
 (a) if you are your *preservation age or older on the last day of the income year in which you receive the payment—15%; or
 (b) otherwise—30%.

Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

 (4) The amount is so much of the *taxable component of the payment as does not exceed the lesser of:
 (a) the *ETP cap amount, reduced (but not below zero) by the amount worked out under this subsection for each *life benefit termination payment you have received earlier in the income year; and
 (b) the ETP cap amount, reduced (but not below zero) by the amount worked out under this subsection for each life benefit termination payment you have received earlier in consequence of the same employment termination, whether in the income year or an earlier income year.

Note 1: For the ETP cap amount, see section 82‑160.

Note 2: If you have also received a death benefit termination payment in the same income year, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the death benefit termination payment (under section 82‑65 or 82‑70).

Note 3: Certain other life benefit termination payments made before 1 July 2012 may be treated as earlier payments under paragraph (4)(b): see section 82‑10H of the Income Tax (Transitional Provisions) Act 1997.

Subdivision 82‑B—Employment termination