Genuine Redundancy Payments
An employer has four valid reasons for terminating an employee’s employment:
Capacity – This relates to the employees ability to perform the job.
Conduct – This relates to contraventions of company policies, safety obligations, inappropriate conduct, etc.
Performance – Poor performance of duties.
Genuine redundancy – Occurs where a position is no longer required to be performed by anyone due to changes in the employer’s operational requirements.
Genuine redundancy payments do not include the payments that employees are entitled to receive on resignation or dismissal under their employment agreement or State or Federal awards. The genuine redundancy payments are the excess amounts above those minimum legal payments.
The tax-free limit for genuine redundancy payments for the 2015 financial year is:
$4,758 for each completed year of service (part years are disregarded).
The tax free amount of a genuine redundancy payment is recorded as Label D on the employee’s payment summary and is not required to be included in the tax return as income. Any redundancy payments made above the tax free limit for the year will be taxed as a normal ETP (Eligible Termination Payment).