Due to a work injury to his right arm, Harry, aged 57 years, took an ETP payment and resigned from ABC LTD on 31 May 2016. His date of birth is 31 May 1954. He had worked with the company since 1 June 1981 (35 years). He was due to retire on 31 May 2019 at age of 60.
He received an employment termination payment (ETP) of $180,000.
The invalidity segment is $14,201
The pre-July 1983 component is $9,857
Calculation the tax payable on the ETP.
The post-30 June component is:
$180,000 – $14,201 – $9,857 = $155,942
The ETP cap amount in FY2015/16 is $195,000, and Harry is above the preservation age of 55 years. The tax payable on the post-30 June component is:
$155,942 × 15% = $23,391
It should be noted that the whole-of-income cap of $180,000 does not apply to Harry’s ETP as an invalidity payment qualifies as an excluded payment under ITAA 97 s 82-10(6)(c)