Lump Sum Payments on Termination of Employment

(last updated 05/06/2014)

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Lump sum payments on termination of employment

Lump sum payments are made to employees for a variety of reasons (also see our post on Termination Triggers):

  • when you leave a job, you may receive lump sum payments for unused annual leave and unused long service leave;
  • if your employment was terminated, certain payments for unused annual and long service leave are taxed concessionally. These amounts must be recorded separately on your payment summary and your tax return;
  • you can also receive a lump sum payment in arrears that is back pay for an earlier income year or years and should also appear separately on your payment summary.
  • you can receive a from another person's employer after the death of that person. See this post for details on Death Beneft ETP's.
Regardless of what kind of lump sum payment you receive, it must be reported on your annual PAYG Payment Summary and will be categorised as per the following four lump sum types :
  • Lump Sum A - Amounts paid for unused holiday pay and unused long service leave, with varying tax implications. 
  • Lump Sum B - Amounts you paid for unused long service leave that accrued before 16 August 1978.
  • Lump Sum D - The tax‑free component of a genuine redundancy payment or an early retirement scheme payment.
  • Lump Sum E - Amounts you paid for back payment of salary or wages that accrued more than 12 months ago or any return to work payments.
Taxation of Lump Sum payments will also vary depending on circumstances:

E-tax Return

See these posts with tips, calculators and checklists to help you prepare your eTax Return (and get a better refund) with less hassle:
For help with your eTax return see our eTax Return Checklist.

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