Employment Termination Payments – What You Need to Know

What Is an Employment Termination Payment (ETP)?

An ETP is a lump sum you may receive when leaving a job. It covers things like:

• Payment in lieu of notice

• Unused sick leave or rostered days off

• A “golden handshake” or gratuity

• Compensation for losing your job or being wrongfully dismissed

• Early retirement scheme payments (over the tax-free threshold)

• Payments made after the death of an employee

What’s NOT an ETP?

• Unused annual leave or long service leave (they’re taxed differently)

• The tax-free part of a genuine redundancy or early retirement scheme

• Superannuation withdrawals

• Foreign termination payments

How Are ETPs Taxed?

ETPs are taxed at special concessional rates — different from your normal pay. But timing matters:

• If the payment is made within 12 months of ending your job, you get better tax rates.

• If it’s paid after 12 months, you may lose the tax concessions.

Tax Breakdown (2023–24):

Up to the ETP cap ($235,000):

• Under preservation age: 32%

• At or above preservation age: 17%

Over the cap: Taxed at 47% (top marginal rate)

Note: The ETP cap is indexed annually.

What Do You Declare in Your Tax Return?

• Your employer will give you a PAYG payment summary – ETP.

• This shows the taxable and tax-free components, plus tax withheld.

• You must declare it in your tax return using this summary.

Special ETP Scenarios

Death Benefit ETPs

• If someone passes away and you receive their ETP, your tax treatment depends on your relationship.

• Dependants (spouse, child under 18, financially dependent) get better tax rates.

Invalidity ETPs

• Leaving work due to permanent disability?

• Some of your ETP might be tax-free.

What Records Should You Keep?

• PAYG payment summary – ETP

• Termination and payment date confirmation

• Letters or contracts related to the payout

Keep these for at least five years.

Gotax Online FAQ – Real Questions, Real Fast

Q: I got a payout when I left my job. Is it an ETP?
A: If it’s for notice, sick leave, or a golden handshake — yes. Annual leave and long service leave aren’t ETPs.

Q: How much tax will I pay on my ETP?
A: Depends on your age and how much you receive. If you’re under the cap, the rate is lower. Over the cap? You’re taxed at 47%.

Q: What if I get the payment more than 12 months later?
A: You may lose the concessional tax rates and get taxed more.

Q: I got an ETP after a relative died. Different tax rules?
A: Yes. If you’re a dependant, you’re taxed less. If not, top rate applies.

Q: Tax was already withheld. Do I still declare it?
A: Yes. Use the figures from your ETP payment summary.

Q: I don’t know if my payout is an ETP.
A: Check your payment summary or ask the GoTax team — we’re here to help.

Bottom line:
ETPs are lump sums with special tax treatment when you leave a job. Know what’s taxable, declare it right, and keep your records. And when in doubt, ask Gotax.

Let GoTax Handle It For You

GoTax Online makes ETPs easy to manage. Plug in the numbers from your ETP summary and we’ll take care of the rest — fast, accurate, and no stress.

Start your return now: www.gotax.com.au/guest-user

Great Gotax Online Resources

The Fantastic Gotax Online Blog Library

And some not so great Gotax Online videos