I am currently paid $243,000 per annum and I am expecting an offer of redundancy in the coming weeks. I am unsure of what my tax position will be if I accept the offer. I have worked for 12 years in my current employment.
My employer provides a calculator to work out what the redundancy payment will be. However, they have told me that any offer of redundancy is not finalised until the day the offer is made. The calculator tells me that I should expect the following:
Notice Period Entitlement: $29,600
Severance Payment: $158,500
Annual Leave Entitlement: $15,000
LSL Entitlement: $41,500
Estimated Gross Payment: $244,600
Will I be paying full tax on this payment? Someone mentioned to me that I will pay concessional tax – what does that mean?
An accountant might be of more help to you, but it is my understanding that on genuine redundancy, the annual leave and LSL will be taxed at 32% (incl. medicare).
The Notice period entitlement and severance payment will form part of your ETP where $71,091 will be the tax free component (assuming you have 12 completed years of service and it is made this financial year). With indexation, I think it'll be slightly more if next FY and on the flip side will be slightly less if you only have 11 completed years of service.
The amount above that (up to $200,000) which is $117,009 is taxed at 32%.
So, all up, I calculate $55,523 of tax on the redundancy payment. So a net payment of $189,077.
But I'm sure there's an accountant here that will be able to clarify this.
Please get in touch if you have any other questions.