The government announced it will extend the concessional tax treatment of genuine redundancy and early retirement scheme payments to those under age pension qualifying age.
The Treasury Laws Amendment (2019 Measures) Bill 2019 will amend the tax law to extend the concessional tax treatment to amounts paid for genuine redundancy and early retirement to individuals who are 65 and over - provided that the dismissal or retirement occurs before they reach pension age.
Currently, the law states that to qualify for concessional tax treatment an individual must have been less than 65 years of age on the day of dismissal or retirement.
The government is looking to change this so that to qualify an individual must in addition to satisfying other criteria, have not reached the age at which they qualify for the age pension on the day of dismissal or retirement.
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This is to bring the law into line with the new pension age of 66, and will remain relevant as that age rises in the future.
A genuine redundancy or early retirement scheme payment is the amount paid upon termination or retirement that exceeds the amount that would be expected to be paid upon voluntary termination or retirement.
The tax law provides for part of a genuine redundancy or early retirement scheme payment to be non-assessable non-exempt income.
The tax free component of an eligible payment is equal to the base amount plus the service amount multiplied by the years of service.
For the 2019-20 financial year the base amount is $10,638 and service amount is $5,320.
The taxable part of a genuine redundancy payment or early retirement scheme payment is an employment termination payment.
However, that rate is effectively capped through tax offset up to a specified threshold.
The amount of this cap for a payment depends on the nature of the payment.
Consultation closes on August 1.