Consider Jim’s case
Jim aged 50 years old has recently been made redundant from his position at his football club. Jim had been working for the club for 3 years as the club mascot and the club decided the position was no longer required. Jim wanted to confirm the taxation treatment of his redundancy payment of $30,000.
As the club can no longer justify funding for the position of a “club mascot” his payment would be considered a genuine redundancy. The amount above the tax free component is taxed at 32% including Medicare levy as Jim is under his preservation age.
The tax free component is calculated as follows:
Base amount + (service amount * completed years of service)
For the 2015 financial year, the Base Amount is $9,514 and the Service Amount per year of completed service is $4,758 resulting in a tax free component for Jim of $23,788.
Depending on Jim’s other income, he will be taxed at the lower of 32% or his marginal tax rate. Alternatively if Jim’s marginal tax rate is over 32% a lump sum tax offset may be available.
Should you wish to discuss your redundancy payment taxation consequences please feel free to contact Andrew Marshall or Janine Orpwood on 5427 8100 for an initial consultation.