Workers

Initial claims from a Protect Genuine Redundancy Account are not subject to tax.

Tax on claims

What tax do I pay on claims?

Protect offers workers two severance account types, a Termination Account, (this is the default account type) and a Genuine Redundancy Account. It's important to know which account you have as the tax implications vary when making a severance claim.

Taxable thresholds are set by the Australian Taxation Office.
The following rates are applicable for the 2018/19 financial year.




Genuine Redundancy Account

Initial GRA claims are not subject to tax, with the exception of retirement claims and members aged over 65 years. If you fall into these categories, please contact us for further claiming information.

Genuine Redundancy accounts tax free threshold for 2018/2019:
$10,399 for the initial year, $5,200 for each full year of service with your employer.


Tax withheld from an initial GRA severance claim:

Under the preservation age: NIL

Over the preservation age: NIL



Tax withheld from subsequent GRA severance claims:

Under preservation age: 32%

Over preservation age: 17%

Over ETP cap ($205,000): 47%



Termination Account

Tax withheld from initial TER severance claim

Under preservation age: 32%

Over preservation age: 17%



Tax withheld from subsequent TER severance claims:

Under preservation age: 32%

Over preservation age: 17%

Over ETP cap ($205,000): 47%




What is my preservation age?

Your preservation age is generally the age that you can retire and access your superannuation or other retirement-related benefits. Your preservation age depends on your date of birth, as set out below:

Date of Birth

Preservation Age

Before 1 July 1960

55
1 July 1960 - 30 June 1961

56
1 July 1961 - 30 June 1962

57
1 July 1962 - 30 June 1963

58
1 July 1963 - 30 June 1964

59
After 30 June 1964
60



Additional tax information

Late termination payments

We are legally required to withold 47% tax from all severance claims made beyond 12 months of your retirement/termination date.

This law does not apply to redundancy claims.



Eligible Termination Payment Cap

Concessional tax rates of 32% (or 17% if you have reached your preservation age) only apply to the first $205,000 of all Eligible Termination Payments. Beyond this cap we are required to withold 47% tax.


Deceased Claim Tax Rates

If you die, payments from your Protect severance account are generally not taxed if the beneficiaries are your financial dependents or your estate.

If your beneficiaries are not your financial dependents , 32% tax will generally apply to the payment from your account.



Whole-of-Income Cap

Any payment received not resulting from redundancy may also be subject to higher taxation via your personal tax return, if your taxable income plus this payment exceeds $180,000.

Please consult your financial advisor if you believe this may apply to you.