Things you need to know
Declare at this question employment termination payments (ETPs) you received because your employment was terminated.
If you have been stood-down or have lost your job as a result of COVID-19, you may have received an ETP. For more information on payments you may receive in these circumstances, see Tax on employment payments.
Types of ETPs
ETPs include:
- a gratuity or golden handshake
- genuine redundancy or early retirement scheme payments above the tax-free limit
- severance pay
- non-genuine redundancy payments
- payments in lieu of notice of termination
- unused rostered days off (RDOs)
- unused sick leave
- compensation for loss of job
- compensation for wrongful dismissal, provided it is paid within 12 months of the actual termination of employment
- payments for loss of future super payments
- payments arising from an employee's termination because of ill health (invalidity), other than compensation for personal injury
- lump sum payments paid on the death of an employee.
Other types of ETPs include:
- death benefit ETPs, these are certain payments made as a consequence of the cessation of a person's employment that you received due to that person's death
- foreign ETPs, these are certain ETPs received from overseas employment which were exempt from income tax under that country's law
- late termination payments, these are certain ETPs you received more than 12 months after you retired or ceased employment.
When not to include an ETP
Do not show the following payments anywhere in your tax return:
- foreign termination payments, these are certain termination payments that were not exempt from income tax of the foreign country
- ETPs you received as the trustee of a deceased estate (ETP code T), these payments must be shown on the trust tax return of the deceased estate
- departing Australia superannuation payments.
If you receive an ETP, the components of the termination payment may be taxed differently.
Did you receive an ETP?
No |
Go to question 5 Australian Government allowances and payments 2023, or return to main menu Individual tax return instructions 2023. |
Yes |
Read on. |
What you need to answer this question
You will need your income statement or PAYG payment summary – employment termination payment.
If you can't find or think there is an issue with your income statement or payment summaries, contact your employer or payer. If you are unsuccessful, see Income statement not finalised or missing payment summary.
If you can't access your income statement through myGov, contact us.
If you have received a foreign ETP, your foreign employer may not have issued you with a PAYG payment summary – employment termination payment.
Completing your tax return
To complete this question, follow the steps 1 to 4 below.
If you received 2 or more ETPs, you will need to complete an ETP schedule. Go to step 5.
Step 1
Write the date of payment and your payer's Australian business number (ABN), as shown on your income statement or PAYG payment summary – employment termination payment in the left column at question 4.
Step 2
Write the total amount of tax withheld from your ETP, as shown on your income statement or PAYG payment summary – employment termination payment, under Tax withheld at the left of question 4 – label I.
Step 3
Write the taxable component of your ETP, as shown on your income statement or PAYG payment summary – employment termination payment, at question 4 – label I.
Step 4
Write the ETP code, as shown on your income statement or PAYG payment summary – employment termination payment, in the CODE box at the right of question 4 – label I in your tax return.
You must enter a valid code. You should contact the employer or payer if your income statement or PAYG payment summary – employment termination payment does not have an ETP code. If you are unable to contact the employer or payer, read through all the codes below and select the one that best describes your payment.
ETP Code |
Description |
|---|---|
R |
if you received your ETP because of:
|
O |
if your ETP is not described by R, for example, you received it because of:
|
S |
if you received a code R ETP in 2022–23 and you had received another ETP (code R or code O), or a transitional termination payment, in an earlier income year for the same termination of employment |
P |
if you received a code O ETP in 2022–23 and you had received another ETP (code R or code O), or a transitional termination payment, in an earlier income year for the same termination of employment |
D |
if you received a death benefit ETP in 2022–23 and you were a death benefits dependant |
B |
if you received a death benefit ETP in 2022–23 and you were not a death benefits dependant, and you had received another death benefit ETP in an earlier income year for the same termination of employment |
N |
if you received a death benefit ETP and you were not a death benefits dependant, and code B does not apply |
You have now finished this question. Go to Where to go next.
Step 5
As you received 2 or more ETPs, you need to download and complete an Employment termination payment schedule using the information on your income statements or payment summaries.
Step 6
When you have completed the schedule, add together:
- all the amounts of tax withheld
- all the taxable component amounts.
Transfer the 2 totals to question 4 in your tax return.
Write the total tax withheld under Tax withheld at label I.
Write the total taxable component at label I.
Print the code letter M in the Code box.
Do not write any date of payment or payer's ABN in your tax return.
Step 7
Attach your schedule to page 3 of your tax return.
Print X in the Yes box at Taxpayer's declaration question 2 on page 10.
Where to go next
- Go to question 5 Australian Government allowances and payments 2023.
- Return to main menu Individual tax return instructions 2023.
- Go back to question 3 Employer lump sum payments 2023.