Unused Annual Leave and Estate 04 Feb 2019

Blog / Financial Planning

Lump sum payments for unused annual leave or long service leave received by a deceased estate are tax-free. 

Tax treatment of lump sum payments for unused annual and long service leave

Where a person terminates employment, they may receive lump sum payments for unused amounts of annual leave and long service leave. For tax purposes, these payments form part of their assessable income1 and a tax offset may then apply to reduce the rate of tax payable.

Exception:  Lump sums received by the person’s estate

Where a person dies and their employer makes lump sum payments for unused annual leave and long service leave to their estate, an
exception applies so that these payments are not assessable income of the estate and are received tax-free. In this case, the employer
is not required to withhold tax from the leave payments and they are not included on the employee’s PAYG summary.

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Disclaimer and Warning
The information above is of a general nature only.  It should not be used as a source to make financial decisions.  It's also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status.  We recommend that if you are looking for advice on this matter, you should contact us .