All payments made by CIRT to our employee members are required to be recorded and reported to the Australian Taxation Office (ATO) and CIRT is required to withhold the appropriate tax when making these payments. The ATO has specified different tax rates to apply in different situations.
CIRT has prepared the below information to be used as a guide only. It relates to tax withheld from severance payments paid by CIRT only. Your individual tax position may be different and you will need to talk to qualified tax professional for individual tax advice and how your tax return should be completed.
Tax Free Redundancies
Genuine Redundancies only may be eligible to receive all or part of their severance payment as a tax free component. Limits apply to the amount which can be paid tax free and this limit is indexed annual and based on the number of years service. For more information on the current tax free payment limit for genuine redundancies, please see the ATO website or speak to your professional tax advisor.
NB: Tax Free limits may include payments made directly to the employee and not just payments may by CIRT. You may exceed the limit and have tax withheld from your payment even if your CIRT severance payment alone does not exceed this tax free limit.
Employment Termination Payments (ETP)
ETP payments are benefits claimed for an employment where the termination is not due to a genuine redundancy. This includes (but is not limited to) resignation, termination of employment due to misconduct, abandonment of employment or the end of a fixed term or training contract. Your claim must be submitted to the administrator within 12 months of the termination of employment to be considered an Employment Termination Payment
The tax rate for ETPs will be determined by the employess preservation age status at the date the claim is paid.
Your preservation age is determined by the ATO based on your date of birth as shown in the table below.
|Date of Birth||Preservation Age|
|Before 1 July 1960||55|
|1 July 1960 – 30 June 1961||56|
|1 July 1961 – 30 June 1962||57|
|1 July 1962 – 30 June 1963||58|
|1 July 1963 – 30 June 1964||59|
|After 30 June 1964||60|
Once you have reached your preservation age, your ETP payment will be tax at the concessional tax rate (Currently 17%). If you have not reached your preservation age at the time your claim is paid, tax will be withheld at the standard ETP rate (Currently 32%)
Other payments – Personal income
Payments other than genuine redundancies payments and ETP payments are processed by CIRT as normal income and are subject to tax at the marginal rates specified by the ATO. These payments from CIRT include other or late termination payments.
As CIRT is not party to other income you may have received throughout the year, CIRT is required to withhold tax at the top marginal rate. Your individual tax position is to between you and the ATO and will be determined when you complete your annual tax return.
If a member chooses not to provide CIRT with their tax file number, tax will be deducted from the payment at the top marginal rate regardless of any other factors.
As at the 1st of July 2017, the top marginal tax rate is 47% and is determined as:
|Tax Component||Tax Rate|
|Total tax to withhold||47%|
The below table summarises the above information.
|Benefit Claimed||Payment Type||Notes||Tax Withholding Rate|
|Retirement||ETP||Employment terminated less than 12 months prior to date of claim (Must be over preservation age)||17%|
|Retirement||Personal Income||Employment terminated more than 12 months prior to date of claim||47%|
|Redundancy||Tax Free Redundancies||Applies to genuine redundancies only. Either Voluntary or Involuntary||0%|
|Withdrawal||ETP||Employment terminated less than 12 month prior to claim and the employee is over preservation age||17%|
|Withdrawal||ETP||Employment terminated less than 12 month prior to claim and the employee is under preservation age||32%|
|Withdrawal||Personal Income||Employment terminated more than 12 month prior to claim||47%|
|Death||Beneficiary is financially dependent upon the deceased||0%|
|Death||Beneficiary is not financially dependent upon the deceased||32%|
|Financial hardship||ETP||Financial hardship claims are only payable once approved by the CIRT Board.||32%|
|Any claim were and employee member chooses not to provide CIRT with their tax file number||47%|
CIRT has prepared the above information to be used as a guide only. It relates to tax withheld from severance payments paid by CIRT only. Your individual tax position may be different and you will need to talk to qualified tax professional for individual tax advice and how your tax return should be completed.