Thinking about starting the new year with a new job? It’s coming to that time of the year where a lot of Australians may be thinking about refreshing their careers with a change of pace, but that could leave them with taxable consequences for their unused leave.
For example, if you currently hold a job and are planning to leave it for the new opportunity that you have been given, there are some tax traps that might impact you.
When your job ends, whether there has been a termination of employment or redundancy you will receive a payment for unused leave. This payment will be taxed differently from your normal income.
This taxation will vary depending on the reason why you left the job and any unused entitlements that have been accrued over your employment (such as long service leave or sick leave).
The tax that you must pay depends on both:
Lump-sum payments that you receive for unused annual leave or unused long service leave are taxed at a lower rate than other income. These lump-sum payments will appear on your income statement or payment summary as either ‘lump sum A’ or ‘lump sum B’.
These payments may also be taxed differently if you lost your job as a result of COVID-19 or were temporarily stood down.
If you are starting a new job, you should also think carefully about the tax-free threshold, as you will be able to claim that in the newest position. This will reduce the amount of tax that is withheld from your pay from your new job.
Concerned about the potential tax consequences of the role, and want some guidance about how a new job might impact your income tax return for 2021-22? Speak with us for guidance and a path forward when it comes to your tax.