Redundancy, Taxation and Your Entitlements
Want to understand the taxation that you might need to pay in making a claim? This page provides information on the taxation of claims.
Member Example - Employee Termination Payment (ETP) Claim
Mark has just resigned from his commercial construction job to take start working in the residential sector. He has $25,000 in his PPTEF Account and his employer notifies the PPTEF that his employment has ended due to resignation. As this is not a genuine redundancy, Mark is now eligible to claim the funds from his account at the nominal tax rate of 32%.
Member Example - Genuine Redundancy Claim
The job Peter was working on has come to completion and unfortunately his position is no longer required and has been made redundant. Peter’s employer notifies PPTEF that his employment has ended and they declare ‘Genuine Redundancy’ as the reason. Peter is now able to claim the $45,000 from his PPTEF account at a 0% Tax Rate for Genuine redundancy (Based on his years of service in the industry).
Member Example - Claiming Genuine Redundancy over the tax free limit
After 15 years working for his last contributing employer, Ahmad has been made redundant. His employer has notified PPTEF that his employment has ended as a genuine redundancy. Ahmad is now eligible to claim the $175,000 in his PPTEF Account.
As Ahmad was born after 1 July 1964, he has not yet reached the preservation/retirement age.
The tax free limit for Ahmad’s claim is calculated as: Base amount + (service amount × years of service). The base amount and service amount are indexed annually. For FY2022/23, these are:
Base Amount: $11,591
Service amount: $5,797
Tax Free Limit = $11,591 + ($5,797 x 15)
Ahmad will be eligible to claim the tax free limit of $98,546. The remaining $76,454 of his claim will be taxed at 32%.
Claim Reasons and Applicable Tax Rates
|Claim Reason||Tax Applicable on Claim|
|Genuine Redundancy||Nil up to the tax-free threshold *|
|Termination||32%, or 17% if reached the preservation age ^|
|Resignation||32%, or 17% if reached the preservation age ^|
|Promotion "off the tools"||32%, or 17% if reached the preservation age ^|
|Leaving Australia||32%, or 17% if reached the preservation age ^|
* Tax free thresholds set by the ATO. PPTEF recommends members seek independent financial advice when making a genuine redundancy claim. Tax rate applied to amounts above the tax-free threshold is 32% or 17% if reached preservation age.
^ The preservation age is set by the ATO and is a sliding scale based on date of birth. Please refer to the ATO website for information regarding the preservation age.
Page Last Updated: 19/01/2023
|This page has been prepared in good faith and|
we accept no liability for any errors or omissions.