|Ruling number||PTA 004|
|Date issued||12 July 2007|
|Issued by||Tony Newbury|
Chief Commissioner of State Revenue
|Effective from||1 July 2007|
The Payroll Tax Act 2007 (the Act), which commenced on 1 July 2007, rewrites the Pay-roll Tax Act 1971 and harmonises the payroll tax legislation in Victoria and NSW. One of the areas which has been harmonised is the treatment of termination payments for payroll tax purposes.
The Commonwealth government introduced superannuation reforms effective from 1 July 2007. One of the consequences of this reform is a change in the treatment of employment termination payments for income tax purposes and also changes in the terminology of termination payments. Employers should contact the Australian Taxation Office for advice in relation to the income tax treatment of employment termination payments, transitional termination payments, unused annual leave and long service leave payments, and genuine redundancy payments and early retirement scheme payments.
This revenue ruling clarifies which termination payments are subject to payroll tax.
Termination payments generally constitute wages for payroll tax purposes under section 27 of the Act. These include:
Employment termination payments may include:
Employment termination payments do not include:
The amount subject to payroll tax is the amount of an employment termination payment paid by the employer that would be income tax assessable income of the employee.
A payment arising from the termination of employment may constitute either a genuine redundancy payment under section 83-175 of the ITAA or an early retirement scheme payment under section 83-180 of the ITAA. Such payments are exempt from payroll tax to the extent that they are exempt from income tax.
The invalidity segment of an employment termination payment within the meaning of section 82-150 of the ITAA is income tax free and is not subject to payroll tax.
All unused (accrued) annual leave and long service leave paid to an employee upon termination of the employee's services (including a bonus, loading or other additional payment relating to that leave) is subject to payroll tax.
Unused sick leave paid upon termination of employment forms part of an employment termination payment and is considered in the previous section.
A death benefit employment termination payment is an employment termination payment made as consequence of an employee’s death. Part of such payments may be income tax free in the hands of the recipient and this income tax exempt part is exempt from payroll tax.
Please note that rulings do not have the force of law. Each decision made by the Office of State Revenue is made on the merits of each individual case having regard to any relevant ruling.