Ask an expert - Lump Sum A[ 18-Nov-2012 ]
I have a general taxation query that you may be able to assist with.
When paying out annual leave and long service leave in conjunction with a redundancy, the leave payments are generally taxed at 31.5% flat rate - these payments then appear in LUMP Sum A box of the payment summary.
My question is, when an employee completes his/her tax return at the end of the financial year, do the Lump Sum A payments get assessed in conjunction with their normal salary and wages or do the Lump Sum A components get treated independently of normal gross salary and wages ?
Any information would be welcomed.
Well, unfortunately - or fortunately if you are an income earner in the highest marginal tax bracket - the tax withheld from payments on termination are legislated amounts and the Tax Office will assess the individual’s returns in accordance with the legislated rates.
So Lump Sum Payments taxed at 31.5% (or 16.5% if applicable) will be assessed by the ATO independently of salaries and wages. And although the individual may apply for a reassessment of their return, it would be a rather optimistic to expect a reduced Lump Sum tax rate, as the ATO are required to apply the legislated rates.
Chief Knowledge Officer
Australian Payroll Association
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