1.1.E.105 Employment termination payment (ETP)
An ETP is generally part of a lump sum payment received when a person is:
- made redundant
- resigns, or
- retires or dies.
Types of ETP
An ETP includes:
- unused rostered days off
- amounts in lieu of notice
- a gratuity or 'golden handshake'
- an employee's invalidity (for permanent disability, other than compensation for personal injury), and
- certain other payments after the death of an employee.
Exemptions & exclusions from ETP
As defined in the Income Tax Assessment Act 1997, the following payments are not considered ETPs:
- a payment for unused annual leave or unused long service leave, or
- the tax-free part of a genuine redundancy payment or an early retirement scheme payment.
Example: The tax free amount of a genuine redundancy payment or an approved early retirement scheme payment could be 2 weeks pay or wages for each year of service.
Definition of genuine redundancy payment
A genuine redundancy payment is so much of a payment that:
- is received by an employee who is dismissed from employment because that employee's position is genuinely redundant, and
- exceeds the amount that would normally have been paid if a person left their work voluntarily.
Example: A person who resigns after 10 years employment could expect payment of:
- unused annual leave, and
- long service leave.
A person who is made redundant may receive payments beyond their leave payments, such as 2 weeks pay or wages for each year of service.
Note: More detailed information on ETPs can be found on the ATO website.
Policy reference: SS Guide 18.104.22.168 Description: employment termination payments (ETPs) & roll-overs for the IMP
ETPs & the IMP
For some income support payments any ETP a person receives may be used in calculating the length of their IMP.
Act reference: SSAct section 14A Social security benefit liquid assets test definitions, section 1064 Module F Ordinary income for the purposes of DSP, section 1066A Module G Payments taken to be ordinary income (DSP), section 1067G Module H Income test (YA), section 1067L Module D Income test (Austudy), section 1068A Module E Ordinary income test (PPS), section 1068-G7 Lump sum payments arising from termination of employment (WA, JSP, PA), section 1068-G7AQ Income test - Definitions (WA, JSP, PA)
Policy reference: SS Guide 22.214.171.124 Application of the income maintenance period (IMP)