About employment termination payments
An employment termination payment (ETP) is a concessionally-taxed payment you receive from your employer when you terminate your employment.
ETP cap amount
An employment termination payment (ETP) is a payment made in consequence of the termination of employment. It can include:
- amounts for unused rostered days off
- amounts in lieu of notice
- a gratuity or 'golden handshake'
- an employee’s invalidity payment (for permanent disability, other than compensation for personal injury)
- certain payments after the death of an employee.
ETPs don't include:
- a payment for unused annual leave or unused long service leave
- the tax-free part of a genuine redundancy payment or an early retirement scheme payment.
The amount up to the ETP cap amount will be taxed at a concessional rate. The amount in excess of the ETP cap amount will be taxed at the top marginal rate.
Note: A temporary 2% levy applies for the 2014–15, 2015–16 and 2016–17 income years to individuals with a taxable income of more than $180,000 per year. The levy is payable at a rate of 2% of each dollar of a taxpayer’s taxable income over $180,000. This will cease to apply from 1 July 2017.
For more information on the ETP caps that apply, see Taxation of termination payments.
ETP cap for life benefit termination payments
Income year | Amount of cap |
|---|---|
2024–25 | $245,000 |
2023–24 | $235,000 |
2022–23 | $230,000 |
2021–22 | $225,000 |
2020–21 | $215,000 |
2019–20 | $210,000 |
2018–19 | $205,000 |
2017–18 | $200,000 |
2016–17 | $195,000 |
2015–16 | $195,000 |
2014–15 | $185,000 |
2013–14 | $180,000 |
2012–13 | $175,000 |
2011–12 | $165,000 |
2010–11 | $160,000 |
2009–10 | $150,000 |
2008–09 | $145,000 |
2007–08 | $140,000 |
The ETP cap amount is indexed in line with average weekly ordinary time earnings (AWOTE), in increments of $5,000 (rounded down). The new indexed amount is generally available each February.
ETP cap for death benefit termination payments
Income year | Amount of cap |
|---|---|
2024–25 | $245,000 |
2023–24 | $235,000 |
2022–23 | $230,000 |
2021–22 | $225,000 |
2020–21 | $215,000 |
2019–20 | $210,000 |
2018–19 | $205,000 |
2017–18 | $200,000 |
2016–17 | $195,000 |
2015–16 | $195,000 |
2014–15 | $185,000 |
2013–14 | $180,000 |
2012–13 | $175,000 |
2011–12 | $165,000 |
2010–11 | $160,000 |
2009–10 | $150,000 |
2008–09 | $145,000 |
2007–08 | $140,000 |
The ETP cap amount is indexed in line with average weekly ordinary time earnings (AWOTE), in increments of $5,000 (rounded down). The new indexed amount is generally available each February.
Transitional ETP cap (up to 30 June 2012)
Transitional arrangements applied if at 9 May 2006, you were entitled to a payment made on the termination of employment under:
- a written contract
- an Australian or foreign law (or an instrument under such a law)
- a workplace agreement under the Workplace Relations Act 1996.
Employment termination payments made after 30 June 2007 (other than those made under the transitional arrangements) cannot be contributed to or rolled over into super.
The taxable component of a transitional termination payment will be taxed at:
- no more than 15% up to the lower cap amount (only where the recipient has reached preservation age)
- no more than 30% on the amount which exceeds the lower cap amount but doesn't exceed the upper cap amount
- the top marginal rate for amounts in excess of the upper cap amount.
Income year | Lower cap amount | Upper cap amount (not indexed) |
|---|---|---|
2011–12 | $165,000 | $1 million |
2010–11 | $160,000 | $1 million |
2009–10 | $150,000 | $1 million |
2008–09 | $145,000 | $1 million |
2007–08 | $140,000 | $1 million |
The lower cap amount for a transitional termination payment is the same as the ETP cap amount for the year (which is generally available each February).
The upper cap amount in relation to a transitional termination payment received in an income year is $1 million.
Both the lower cap amount and the $1 million upper cap amount are reduced by all amounts received by the person that have previously used the transitional termination payments concession. The lower cap amount doesn't apply where the recipient is under preservation age.
Transitional arrangements for termination payments ceased to apply from 1 July 2012.
Tax-free part of genuine redundancy and early retirement scheme payments
This table shows the limit set for genuine redundancy and early retirement scheme payments from 1 July 2007 onwards.
For earlier years, up until 30 June 2007, see Tax-free part of bona fide redundancy payments and approved early retirement scheme payments limits.
Income year | Base limit | For each complete year of service |
|---|---|---|
2024–25 | $12,524 | $6,264 |
2023–24 | $11,985 | $5,994 |
2022–23 | $11,591 | $5,797 |
2021–22 | $11,341 | $5,672 |
2020–21 | $10,989 | $5,496 |
2019–20 | $10,638 | $5,320 |
2018–19 | $10,399 | $5,200 |
2017–18 | $10,155 | $5,078 |
2016–17 | $9,936 | $4,969 |
2015–16 | $9,780 | $4,891 |
2014–15 | $9,514 | $4,758 |
2013–14 | $9,246 | $4,624 |
2012–13 | $8,806 | $4,404 |
2011–12 | $8,435 | $4,218 |
2010–11 | $8,126 | $4,064 |
2009–10 | $7,732 | $3,867 |
2008–09 | $7,350 | $3,676 |
2007–08 | $7,020 | $3,511 |
The base limit and service amount is indexed in line with average weekly ordinary time earnings (AWOTE) each income year. The new indexed amount is generally available each February.
Note: A temporary 2% levy applies for the 2014–15, 2015–16 and 2016–17 income years to individuals with a taxable income of more than $180,000 per year. The levy is payable at a rate of 2% of each dollar of a taxpayer’s taxable income over $180,000. This will cease to apply from 1 July 2017.