The transitional arrangements apply to you if:

 

> a payment on termination is specified in an existing employment contract as at 9 May 2006; and

 

> the payment is made prior to 1 July 2012.

 

Refer to the links below for more details.

 

 

Transitional termination payments may be:

 

> contributed (in full or in part) to a superfund; or

 

> used (in full or in part) to buy a super annuity before 1 July 2012.

 

If this is done it is known as a directed termination payment.

 

 

Transitional ETP Caps	Lower Cap (1)	Upper Cap (2)
2011/2012	$165,000	$1,000,000
2010/2011	$160,000	$1,000,000
2009/2010	$150,000	$1,000,000
2008/2009	$145,000	$1,000,000
2007/2008	$140,000	$1,000,000

 

 

(1) The Employment Termination Payment Cap will be indexed to AWOTE annually.

 

(2) The $1 million will not be indexed.

 

 

The tax treatment of life benefit termination payments that are not rolled over can be summarised as follows:

 

Age	Transitional ETP Lower Cap	The Rest up to $1 million	Excess Above $1 million (2)
Under preservation age# on the last day of the income year in which the payment is made*	Maximum Rate 30%	Maximum Rate 30%	45%
Preservation age# or over on the last day of the income year in which the payment is made*	Maximum Rate 15%	Maximum Rate 30%	45%

 

# Preservation age is the age at which retirees can access their superannuation benefits.  This depends on their date of birth.  Refer to the link below for more information on ‘Preservation Ages’.

 

* Included in Taxable Income for Medicare Levy purposes.

 

 

ETP’s will be added to the taxpayer’s other taxable income. 

 

Only that part of an ETP which takes a taxpayer’s total annual taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset.

 

Any amount of the ETP that causes taxable income to exceed $180,000 will be taxed at the usual marginal tax rates. 

 

ETP’s will be added to the taxpayer’s other taxable income. 

 

Only that part of an ETP which takes a taxpayer’s total annual taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset.

 

Any amount of the ETP that causes taxable income to exceed $180,000 will be taxed at the usual marginal tax rates. 

 

Financial year	Cap
2012/2013	$175,000
2011/2012	$165,000
2010/2011	$160,000
2009/2010	$150,000
2008/2009	$145,000
2007/2008	$140,000

 

NB:

The taxable components of all life benefit employment termination payments received in an income year are counted towards this cap.

 

Also counted towards the cap are the taxable components of any life benefit employment termination payments which have been received in an earlier income year for the same employment termination.

 

The death benefit cap is independent of the life benefit termination payment (i.e. a recipient can get both).

 

 

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