There are two types of lump sum payments.
The first type is genuine redundancy payments, which is a payment to an employee who has been retrenched because the job he or she was doing no longer exists.
Any payment that meets the condition of a genuine redundancy is tax free up to a certain limit (based on the number of years of service with your employer).
The Types of Payments Which Are Regarded as Genuine Redundancy Payments Are:
– Payment in lieu of notice,
– Severance payment for a number of weeks for each year of service, or
– A lump sum payment which s often referred to as a “golden handshake”.
Customers can visit the how online tax works page and follow the steps to lodge your tax return now.
The other types of payments are not regarded as genuine redundancy payments, and are consequently taxed at normal tax rates.
These include such things as: any salaries or wages owing to you for work that you have already done, any unused leave or leave loading paid on termination of employment, payment of any unused long service leave, and payment of superannuation benefits.
Visit our How It Works page and follow the steps to lodge your tax online now.