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Other Taxable Income

The whole-of-income cap incorporates other taxable income that you earn in the same income year. Other taxable income is simply assessable income minus deductions you are entitled to.

Taxable income includes:

 

Note: If you receive a lump sum payment for unused long service leave which accrued before 16 August 1978 (shown at label B on a PAYG payment summary - individual non-business), only 5% of this payment amount is included in other taxable income.

Taxable income does not include:

 

Example 4: Including taxable income in the whole-of-income cap

In August 2016, Tyrion is terminated from his job and receives a $100,000 gratuity and $20,000 for accrued leave.

His employer also paid Tyrion $5,000 in salary for the period 1 July 2016 to date of termination. When working out the tax on Tyrion's ETP of $100,000, his employer calculates his whole-of-income cap as $155,000, being $180,000 less $25,000 (salary plus accrued leave payment). The calculated whole-of-income cap is less than the ETP cap ($195,000) and, as Tyrion has not reached his preservation age, his employer withholds 32% in tax from the $100,000 ETP, totalling $32,000. Tyrion's employer gives him a PAYG payment summary - employment termination payment showing:

Total tax withheld

$32,0000

Date of payment

15 August 2016

Taxable component

$100,000

Tax-free component

Nil

ETP code

O

Tyrion gets a new job in September 2016 and earns a further $60,000 salary in the 2016-2017 income year.

When calculating the tax on Tyrion's ETP at the end of the financial year, his taxable income for the purposes of the whole-of-income cap is $85,000 calculated as the sum of:

Therefore, Tyrion's calculated whole-of-income cap is $95,000, which means $5,000 of his $100,000 ETP will be taxed at 49%. This is because the whole-of-income cap is reduced by Tyrion's other taxable income (that is, $180,000 - $85,000).

Tyrion will need to pay an additional 17% tax on the $5,000 (that is, 49% minus the 32% already withheld by his employer). This means Tyrion will have a tax debt of $850.

Source:

https://www.ato.gov.au/individuals/working/in-detail/leaving-a-job/taxation-of-termination-payments/?anchor=Example4#Example4

Topic: 40907