ap_etp06

Termination Payments Surcharge

What is the Termination Payments Surcharge?

In the never ending quest to find ways of getting more tax revenue while appearing to be fair and even handed, the government came up with the idea of adding a surcharge to the superannuation contributions made by taxpayers on what were deemed to be high incomes.

Part of this plan included adding a surcharge to the tax attributable to any eligible termination payments received by such taxpayers in the 1997 and later income years.

You will find details in paragraphs 11-210 to 225 of the Master Tax Guide.

Who pays it?

The surcharge is imposed on Eligible Termination Payments

(but not Post June 1994 invalidity payments or employee share acquisition scheme payments)

paid after 20 August 1996 on

payments that come within the definition in section 27 A (1) para (a)

any payment made in respect of the taxpayer in consequence of the termination of any employment of the taxpayer, other than a payment:(the exceptions are bit wordy, so you can refer to the Act if you want to be really fastidious). A simpler way of expressing this is to call them golden handshakes received from an employer

If the taxpayer's adjusted taxable income exceeds the surcharge threshold ($73,220 for the 1998 income year)

adjusted taxable income = taxable income

less Eligible Termination Payments

(that does not include the eligible termination payments other than golden handshakes or lump sum accrued leave payments relating to redundancy, early retirement or invalidity)

less surchargable contributions

(section 7(2) of the Terminations Payments Tax Act contains full details)

How much is it?
It all depends on your adjusted taxable income!

adjusted taxable income

equal to or greater than upper threshold ($88,910) 15% of termination payment

Financial year	Lower threshold	Upper threshold	Denominator
1997/98	$73,220	$88,910	$1,046

adjusted taxable income

between

lower threshold ($73,220) and upper threshold ($88,910)

Relevant adjusted taxable income	Less	Lower threshold
*Denominator*