At some stage during every Queenslander’s working life, it is highly likely that you will change or leave your job. This can be for a number of reasons including seeking a better opportunity or taking a break, redundancy or, ultimately, retiring.
Generally, when an individual leaves a job, they may receive various payments ranging from unused annual leave payments to lump sum amounts such as ‘golden handshakes’ or ‘payments in lieu of notice’.
Depending on the type of payment, it may be classified as an Employment Termination Payment ‘ETP’ meaning it will be subject to pre-determined tax rates. Payments which are not classified as ETPs are subject to tax at rates specific to the payment.
In the 2012 Federal Budget, the Federal Government announced changes to the way ETPs are taxed from 1 July 2012. These changes can impact significantly on the amount of tax deducted from an ETP and therefore reduce the net payment received by the individual. The recent rule changes can leave an individual with three types of payments, with different tax implications and strategic opportunities:
- ETPs that are impacted by the rule changes
- ETPs that are not impacted by the rule changes, and
- Other payments which are not impacted by the rule changes
Therefore it is more important than ever to get advice prior to actually changing or leaving a job to help optimise the payment received.
Changes in legislation makes matters complex. To find out which payments are classified as ETPs, or to find out how a proposed career change might impact your personal wealth, seek advice in advance from OBT’s financial planning team in Gatton to make informed financial decisions.