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Termination payments

Components of an ETP

The eight possible components of an ETP are:
  1. Concessional Component -
    5% assessable taxed at ordinary rates

  2. Post 30 June 1994 Invalidity component -
    exempt tax free

  3. Undeducted contributions
    not assessable tax free

  4. Non-qualifying component
    fully assessable tax at ordinary rates

  5. Capital Gains Tax exempt component
    exempt tax free

  6. Excessive component
    fully assessable taxed at highest marginal rate i.e. 47% plus medicare levy

  7. Pre 1 July 1983 component
    5% assessable taxed at ordinary rates

  8. Post 30 June 1983 component
    fully assessable taxed at reduced rates


Post 30 June 1983 component

The maximum tax rates for 2006/07 applicable to the post 30/6/83 component are:

Age and amount Taxed element Untaxed element
Under 55 years of age 20% plus Medicare Levy 20% plus Medicare Levy
55 years and over
$0 to 135,590 		Nil 20% plus Medicare Levy
55 years and over
$135,591 + 		15% plus Medicare levy 30% plus Medicare levy

Termination Payments

Lump sum payments may be received in relation to:
  • Unused Annual Leave
  • Unused Long Service Leave
  • Eligible Termination Payments (ETP’s)
  • Redundancy
Unused Annual Leave

Pre 18 August 1993 component

Fully assessable

Taxed at a maximum rate of 30% (plus Medicare Levy)

Post 17 August 1993 component

Fully assessable

Taxed according to the taxpayer’s relevant marginal tax rate

Unused Long Service Leave

Pre 16 August 1978 component

Only 5% is assessable income

Taxed according to the taxpayer’s relevant marginal tax rate

Post 15 August 1978 to Pre 18 August 1993 component

Fully assessable

Taxed at a maximum rate of 30% (plus Medicare Levy)

Post 17 August 1993 component

Fully assessable

Taxed according to the taxpayer’s relevant marginal tax rate

Eligible Termination Payments (ETP’s)

Examples of ETP’s include :
  • Superannuation lump sum payments
  • Payments for unused sick leave
  • "Golden handshakes"
  • Approved Deposit Fund (ADF) payments

Post 30 June 1983 component

Fully assessable

Taxed at a maximum rate determined by:

  • The recipient’s age.
    If the recipient is aged 55 or older,

  • the amount of the component, and

  • Whether the amount is a taxed or untaxed element