Australia: Retirement: Redundant Retirees Get Tax Break
Recently the Australian government amended benefit language to align the official retirement age and taxation levels for the superannuation system (also known as ‘super’) to match the newest shifts in its social security system. This is especially noteworthy for employees who take early retirement once their job has been determined redundant by the employer.
Historically, Australians over 60, but under 65, got a tax-free portion of their retirement income from their super depending on their number of FULL years of work. The government’s stated pension age (for those who need retirement income assistance) will move from age 65 to age 67.
The new superannuation rules match the government’s. Meaning people ages 66 and 67, who lose their jobs to redundancy, get access to this tax-free portion from their employer sponsored retirement funds.
According to the Australian Taxation Office website only a payment for a genuine redundancy is eligible for the tax-free limit. A genuine redundancy occurs when the employee’s job is abolished. In other words, the employer decided the job no longer exists, and employment is terminated. A payment for a non-genuine redundancy is taxed as part of the employee’s employment termination payments (ETP).
This article is provided by CA Financial Services Group, Asinta’s Partner in Australia.