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Tax free redundancy payments

Protect’s genuine redundancy claims are tax free up to the maximum limits imposed by the ATO, which ensures you get the maximum possible payout when you need it most.

As of 1 July, 2021, the tax free threshold increased to $11,341 for the initial year, and $5,672 for each full year of service with your employer.

How do I become eligible for a tax free component?

The tax you pay is determined by the reason your employment ended. If your employer makes you genuinely redundant your initial severance claim will be paid to you tax free up to the maximum amount allowed by the ATO.

If your employment is terminated for any other reason your initial claim will be taxed.

 

Example of savings:

Jim has a balance of $7,000 in his Protect account, he is under 65 years old and has been with his current contributing employer for two and a half years

When Jim is made redundant he lodges a claim with Protect.

Jim is entitled to a tax-free redundancy payment of up to $22,685
Calculated as: ($11,341 + [2 x $5,672])

Therefore the entire balance of Jim’s account will be paid out to him tax free.

 

Further information:

  • Answers to frequently asked taxation questions can be found at the severance and redundancy FAQ page. However, please be reminded that Protect cannot provide you with specific tax advice. We strongly recommend that you consult with your financial advisor or the ATO to discuss the effect of your Protect claim payment on your own personal circumstances.
  • Our claim page details the information you need to submit a claim online or via our App

 

 Download

Severance and redundancy brochure

Published Thursday 1 July, 2021