Australia Alters Tax Concessions for Some Redundancies, Early Retirement

Connecticut Enacts Paid Family and Medical Leave

Measures that increase the cut-off age for concessional tax treatment of termination payments because of an employee’s genuine redundancy or a qualifying early retirement scheme received Royal Assent on 28 Oct 2019. The measures feature in Treasury Laws Amendment (2019 Measures No. 2) Act 2019, which align the cut-off age for individuals to receive tax concessions with the current Age Pension age. 

Highlights

  • The qualifying age to receive the Age Pension is transitioning from age 65 (prior to 1 Jul 2017) to 67 (from 1 Jul 2023). Under old law, concessional tax treatment of qualifying termination payments was restricted to individuals younger than 65. Individuals aged between 65 and their Age Pension age — who otherwise would have qualified for the concession — were unable to access either the Age Pension or the tax-free component of genuine redundancy or early retirement scheme payments.
  • Under the new law, from 1 Jul 2019 employees aged 65 or more, but younger than their Age Pension age at the time of dismissal or when taking a qualifying early retirement, are entitled to receive the tax concessions, provided they meet other qualifying conditions.

Prior to this new law, individuals who were made redundant or took early retirement were allowed to ask their employer to refund the excess tax withheld on their payments and the employer received a refund from the Australian Taxation Office. However, employers didn’t have to comply with refund requests because the correct tax was paid at the time and in those cases, employees were credited when they submitted their income tax returns. 

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Paul Shallue
by Paul Shallue

Principal, Mercer Wealth

Fiona Webster
by Fiona Webster

Principal, Mercer’s Law & Policy Group

Stephanie Rosseau
by Stephanie Rosseau

Principal, Mercer’s Law & Policy Group

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