Annual leave which has accrued since 18 August 1993 is taxed at marginal tax rates, however certain payments attract tax concessions.
They include payments in respect of:
- periods of employment before 18 August 1993
- genuine redundancy or approved early retirement schemes
Where payments are made for periods which cover before and since 18 August 1993, the payment is apportioned by the number of days to determine the tax exposure. Unused annual leave accrued before 18 August 1993 has tax limited by offset to a maximum 30%.
Payments on the death of an employee to beneficiaries or the trustee of the deceased’s estate are generally exempt from tax.
Leave is specifically excluded from the concessionally taxed ETP rules.
Depending on circumstances, it may be possible to influence the tax applicable to unused annual leave by paying attention to employment agreements, timing and the opportunities for salary sacrifice. See the notes and references in respect to this here.
- Schedule 7 – Tax table for unused leave payments on termination of employment
- Withholding from unused leave payments on termination of employment
This page was last modified 2017-11-03