Contact: John Randall
Deloitte
Partner
61-2-9322 7550

Contact: Amanda Kennedy
Deloitte
Media Relations
+61 [0] 418 806 477

The announcement today of a 1 July 2007 start date for new rules on employer termination payments is likely to bring on a rush of retirements according to Deloitte Tax and Superannuation Partner, John Randall.

“Employers and employees have been waiting anxiously for details on the effective start date for the application of the new rules, as the tax consequences are likely to be significant,” Mr Randall said.

“Under the current rules, an employee could roll over an employer termination payment to a superannuation fund (or similar entity), and have the superannuation fund pay tax on the roll-over at 15 per cent, and so defer most of the taxation obligations until retirement.

“Under the new rules, unless certain transitional measures apply, the employee will not be able to roll-over any of the benefit to a superannuation fund. 

“In addition, taxable amounts in excess of $140,000 will be taxed at the top marginal tax rate (46.5%), with concessional rates applying to amounts under $140,000 depending on the employee’s age.

“Now people can make a decision about their retirement date, knowing that a 30 June 2007 termination payment will be treated significantly differently to a 1 July 2007 termination payment.

“We expect this will mean many people choose to retire before these measures come into force. This is likely to place enormous pressure on employers and employees in the upcoming months, particularly in a market that that is trying to keep its skilled workers in employment for as long as possible.”

To download the media release, please see below.