ETP : THe Whole-Of-Income Cap

Q&A Tax

Question :

Emilio is a 61-year-old former commercial pilot who retired from his job in November 2019. His taxable income from his wages in 2019–20 up to that point was $100,000. His employer paid him an ETP of $50,000, in the form of a gratuity. 

How much his employer should withhold from the ETP? 

 

Answer :

Emilio’s ETP is a non-excluded ETP, so the lesser of the two caps apply. 

Emilio’s whole-of-income cap is reduced from $180,000 to $80,000 because he earned $100,000 in 2019–20 .  T

his is less than his ETP cap ($210,000 for 2019–20), so the calculated whole-of-income cap applies to his ETP. 

Since Emilio’s ETP ($50,000) is less than his calculated whole-of-income cap ($80,000), his entire ETP is taxed at concessional rates. 

Emilio has reached his preservation age, so his employer withholds tax at a rate of 17% from his ETP. 

Notes: The whole-of-income cap is $180,000 for the 2018-19 year minus other taxable income you earn throughout the income year. The taxable component of your ETP is taxed at either 17% or 32% up to your whole-of-income cap. Any amounts over the whole-of-income cap are taxed at the top tax rate (47%). 

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