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Taxation of your unused leave when leaving a job

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.

The taxation will vary depending on the reason why you left the job and any unused entitlements that have been accrued over your employment (long service leave or sick leave).

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.

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What is the transfer balance cap?

February 18, 2021

The transfer cap refers to the amount of money that can be transferred from your superannuation account to your tax-free ‘retirement phase’ account.

At the moment, the transfer balance cap is $1.6 million and all individuals have a personal transfer balance cap of $1.6 million.

Exceeding the personal transfer balance cap means that you have to:

The amount in your retirement phase account may grow over time, due to investment earnings. Although this may grow beyond the personal transfer cap, you will not exceed the cap. However, if you have already used all your personal cap, and then your retirement phase account goes down, you cannot ‘top it up’.

The rules applied to capped defined benefit income streams are different from other income streams – this is because you can’t usually transfer or commute excess amounts from other streams.