Save
Tax sweetener announced for redundancies, early retirement
The federal government has announced changes to the current tax-free component available on genuine redundancy and early retirement scheme payments, which is good news for Australian workers and their savings plans.
Tax sweetener announced for redundancies, early retirement
The federal government has announced changes to the current tax-free component available on genuine redundancy and early retirement scheme payments, which is good news for Australian workers and their savings plans.
From 1 July 2019, the eligibility age limit for the tax-free concession on these payments will be raised to be in line with the Age Pension qualifying age.
Up until now, this tax-free component has only been available to those aged below 65 at the time employment is terminated.
As a result of the changes, all individuals younger than 66 will be able to receive the tax-free component on the payment received from their employer in the event of genuine redundancy or early retirement as of next year.
This threshold will increase again to age 67 by the year 2023.
In a statement released on Saturday, Treasurer Josh Frydenberg said the reforms will “not only ensure older Australians keep more of the money they’ve earned, it will also support workforce participation by removing a barrier that may have prevented some from working longer.”
What does this mean for you?
Liam Shorte, director of Verante financial planning, told Nest Egg he welcomes the reform.
He says he has seen clients exit the workforce earlier than desired in order to avoid paying tax on their redundancy payments.
“Until now, some clients who did not necessarily wish to take a voluntary redundancy at 62-65 when offered, had done so as they did not want to lose out on the tax-free component of any redundancy payout by waiting for another offer in later years,” Mr Shorte said.
“It may not seem like much, but to be able to still avail of the benefit up to age 66 and later 67 will mean one to three more years of additional savings for some clients.”
Mr Shorte says the change is important in promoting older individuals to stay in the workforce longer and grow their nest egg.
“These years leading up to 65, 66 or 67 are the years when people can seriously save large amounts both through salary sacrifice and non-concessional contributions to help fund their own retirement,” he said.
“Many will only realise how good this move is when they are offered a redundancy and see the tax outcome in the coming years.”
RELATED ARTICLES
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
More articles
OUR PLATFORMS AND BRANDS
- Accountants Daily
- Accounting Times
- Adviser Innovation
- Australian Aviation
- Broker Daily
- Cyber Daily
- Defence Connect
- Fintech Business
- HR Leader
- Independent Financial Adviser
- Investment Centre
- Investor Daily
- Lawyers Weekly
- Money Management
- Nestegg
- Property Buzz
- Real Estate Business
- Smart Property Investment
- SMSF Adviser
- Space Connect
- Super Review
- The Adviser
- Wellness Daily
- World of Aviation
EVENTS AND SUMMITS
- Accountants Daily 30 Under 30 Awards
- ACE25
- Adviser Innovation Summit
- Australian Accounting Awards
- Australian Aviation Awards
- Australian Broking Awards
- Australian Defence Industry Awards
- Australian Law Awards
- Australian Space Awards
- Australian Space Summit
- Better Business Summit & Awards
- Broker Daily Business Awards
- Corporate Counsel Summit & Awards
- Cyber Security Summit & Awards
- Defence Connect Budget Lunch
- Defence Connect DSR Summit
- Fund Manager of the Year Awards
- ifa Excellence Awards
- ifa Future Forum
- Investor Daily ESG Summit
- Lawyers Weekly 30 Under 30 Awards
- Lawyers Weekly Women in Law Forum
- New Broker Academy
- Partner of the Year Awards
- REB Awards
- Reinnovate
- SME Broker Bootcamp
- SMSF Adviser Technical Day
- Super Fund of the Year Awards
- Women in Finance Awards
- Women in Law Awards
- Accountants Daily Podcast Network
- Australian Aviation Podcast Network
- Broker Daily Podcast Network
- Defence Connect Podcast Network
- HR Leader Podcast Network
- REB Podcast Network
- Relative Return
- Space Connect Podcast
- The Adviser Podcast Network
- The ifa Show
- The Lawyers Weekly Show
- The Smart Property Investment Show
PODCASTS
LEARNING AND EDUCATION
MOMENTUM MARKETS NETWORK
LINKS
STAY CONNECTED
Make your nest egg grow. Register now for nestegg updates.