Unused Leave Payments on Termination

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Unused Leave Payments

Certain payments in respect of unused annual leave and long service leave are entitled to concessional tax treatment when employment is terminated. The amounts are separately recorded on the employee’s Payment Summary and separately recorded on the tax return.

These payments are not Eligible Termination Payments (ETPs).

Annual Leave

On resignation or retirement		PAYG summary payment code
Accrued before 18/8/93	100% included in assessable income and taxed at a maximum of 30% plus Medicare	A
Accrued after 17/8/93	100% included in assessable income and taxed at marginal rate plus Medicare	Gross

On bona fide redundancy, invalidity or approved early retirement scheme		PAYG summary payment code
100% included in assessable income and taxed at a maximum of 30% plus Medicare		A

On death	Tax-free	Not recorded

Long Service Leave

On resignation or retirement		PAYG summary payment code
Accrued before 16/8/78	5% included in assessable income and taxed at marginal rate plus Medicare	B
Accrued between 16/8/78 & 17/8/93	100% included in assessable income and taxed at a maximum of 30% plus Medicare	A
Accrued after 17/8/93	100% included in assessable income and taxed at marginal rate plus Medicare	Gross

On bona fide redundancy, invalidity or approved early retirement scheme		PAYG summary payment code
Accrued before 16/8/78	5% included in assessable income and taxed at marginal rate plus Medicare	B
Accrued after 15/8/78	100% included in assessable income and taxed at a maximum of 30% plus Medicare	A

On death	Tax-free	Not recorded

Link to expert information on this topic

COMPONENT OF LEAVE PAYMENT ATTRIBUTED TO OVERSEAS EMPLOYMENT (ATO ID 2011/29)

HOW TO WITHHOLD TAX ON UNUSED LEAVE PAYMENTS ON TERMINATION OF EMPLOYMENT

This page was last edited on 5 January 2021

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