Money Doesn’t Come Without Guidance ...
When your job has been terminated by your employer, they have to give you a redundancy payment. The amount is calculated by your employer depending on your employment condition. It can include- the payments in lieu of notice and unused rostered days off, gratuity, invalidity payment etc.
This payment can comprise of two different components. One is tax-free component and another is taxable component. Depending on the type of termination payment, the concessional tax treatment may be limited to the smaller of Employee Termination Payment cap and the whole-of-income cap. The amount of ETP cap for the 2016–17 income years is $195,000, which is indexed & the amount of whole-of-income cap is $180,000, which is not indexed. The ETP summary has a code that you can use to describe the type of ETP & to identify which cap is applicable for you.
An employee may enjoy tax-free component, if part of the ETP relates to employment that occurred before 1 July 1983 or the employee sustained a permanent disability, but death benefit cannot be included under this component.
This payment has to be made within 12 months from the date of termination to receive concessional tax treatment. Otherwise it will be added with the assessable income and taxed at their marginal rates. You should also be careful about the ETP code, cause if you make any mistake in the amount or ETP code you have to complete a new payment summary again.