The Government will limit the availability of the employment termination payment (ETP) tax offset.
At present, the ETP tax offset ensures that ETPs are taxed at a maximum rate of 15% for those over preservation age and 30% for those under preservation age, up to an indexed cap ($165,000 in 2011-12 and $175,000 in 2012-13).
From 1 July 2012, only that part of an affected ETP, such as a “golden handshake”, that takes a person’s total annual taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset. Amounts above this whole of income cap will be taxed at marginal rates.
Existing arrangements will be retained for certain ETPs relating to genuine redundancy (including to those aged 65 and over), invalidity, compensation due to an employment related dispute and death.
Source: Budget Paper No 2 [p 33]; Treasurer’s press release
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