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Employment Termination Payments (ETPs)
The taxation of ETPs will be changed to reflect the removal of the RBL system and benefits tax. Because super benefits paid to those over age 60 will be tax free, ETPs will no longer be able to be contributed to super.
Transitional arrangements
From 1 July 2007, rollover of employee benefits (Employment Termination Payments) generally cannot be made to superannuation. Rollovers are permitted under transitional arrangements where the payment on termination of employment was specified in an existing employment contract as at 9 May 2006 provided payment is made prior to 1 July 2012. These are now known as Directed Termination Payments.
We have based the following on information provided by the ATO (see below):
What are the transitional arrangements?
Transitional arrangements apply if the employee was entitled, as at 9 May 2006, to a payment made on the termination of employment under:
- a written contract
- an Australian or foreign law (or an instrument under such a law), or
- a workplace agreement under the Workplace Relations Act 1996.
A payment will generally need to be received within 12 months of the termination to qualify as an employment termination payment.
For more information, refer to the ATO's fact sheet:
Employment termination payments - transitional arrangements (NAT 70644).
What are the employer's obligations?
- The employer must give the employee a completed Transitional termination payment pre-payment statement before making the payment.
- Employees have 30 days to complete the form and return their payment instructions.
- If the member elects to rollover their benefit, the employer must forward payment as instructed and complete a Directed termination payment statement form.
- A copy of this form is to be provided to the super fund and to the member. The employer is also to keep a copy for their records for 5 years.
For more information, refer to the ATO's forms:
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