LETTER OF ADVICE TO CARLOS2
superannuation fund. This consists of investment earnings of $125000 and accumulated
concessional contributions of $125000 on which the fund has paid the tax. Your mortgage
currently is $120000 and you need an additional income of $25000 p.a. and $18000 p.a. for
paying the same.
Law
Under subsection 83-175(1) of ITAA 1997, a termination payment constitutes a genuine
termination payment if it is received by the employee due to the reason that his position is
genuinely redundant. As per section 82.130 of ITAA 1997, an Employee Termination Payment
(EPT) is a form of lump sum payment that is received by a person from their employer on losing
their job or the death of another person resulting in the termination of the employment of the
person1. It should be received within 12 months of the death of the person and it is not a payment
covered under section 82-135 of the act. The ATO guidelines state that an ETP includes aspects
of salary like severance pays and gratuities. However, it does not include payments like accrued
annual leaves and redundancy payments that are not chargeable to tax. According to the ATO
rules, the ETP cap is indexed on a yearly basis. For the taxation year 2019-20, this limit after
indexation is available up to $210000. If the payments are more than this amount, then the
highest rate of tax is to be charged on the payments. If the payments are not paid in lump sum
and made on an instalment basis, then the payments previously made to the employees are
reduced from the current redundancy payments. If the termination of the employee takes place
before 1 July 1983, then a part of the income is not chargeable under tax. The tax free amount for
the year 2019-20 is to be calculated using the following formula: Base amount + (service amount
1 "Taxation of Termination Payments". 2019. Ato.Gov.Au. Accessed October 7 2019.
https://www.ato.gov.au/Business/Your-workers/In-detail/Taxation-of-termination-payments/?
page=4#Working_out_and_reporting_the_tax_free_amount.

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