Document ID: chunk:federal_register_of_legislation:F2024L00664:schedule:11:p4
Version: federal_register_of_legislation:F2024L00664
Segment Type: schedule
Provision Reference: sch 11 (pt 4/4)
Character Range: 212921–214913

Examples
Example 1: ETP cap

Lloyd is an employee of BigBiz Pty Ltd and is 41 years old. His preservation age is 60. He is made redundant from his position at BigBiz and receives an ETP of $45,000. This is the taxable amount remaining after Lloyd received a genuine redundancy payment. (The amount that exceeds the tax-free base limit and for each complete year of service limit is an ETP.)

The ETP has no tax-free component.

BigBiz is required to withhold from the ETP. Lloyd has previously provided his TFN to BigBiz and claimed the tax-free threshold.

BigBiz classifies the payment as a genuine redundancy and, using Table A, works out that only the ETP cap applies.

As Lloyd is under preservation age and his entire ETP fits within the ETP cap amount, BigBiz withholds $14,400 from Lloyd's ETP. This is 32% of Lloyd's taxable component of $45,000.

Example 2: Whole-of-income cap – payment less than cap

Jane is an employee of SmallBiz Pty Ltd and is 58 years old. Jane's preservation age is 60. Jane resigns from SmallBiz to start a new business.

Up until Jane's date of resignation, SmallBiz paid Jane salary and wages totalling $84,000. Under her employment contract, Jane will receive a 'golden handshake' of $10,000 from SmallBiz. This payment is an ETP and has a tax-free component of $2,000 (relating to service before July 1983) and a taxable component of $8,000.

SmallBiz is required to withhold an amount under the PAYG withholding system. Jane had previously provided her TFN to SmallBiz. SmallBiz does not withhold from the tax-free component of $2,000 but must withhold an amount from the taxable component of $8,000.

SmallBiz classifies the payment as a 'golden handshake'. Using Table A and the following steps, SmallBiz works out which cap to apply and the withholding rate:
Step  SmallBiz action                                                                                                                                                                Result