Increases in High Income and Redundancy Tax-Free Thresholds

10 July 2014

High Income Threshold

As from 1 July 2014, the high income threshold relating to unfair dismissal claims and the coverage of Modern Awards, was increased from $129,300.00 p.a. to $133,000.00 p.a.

      This figure includes:

  • salary/wages;

  • money which is paid on an employee’s behalf (e.g. superannuation top-ups or salary sacrifice);

  • the agreed value of non-monetary benefits (e.g. laptops and mobile phones).

       This figure does not, however, include:

  • payments which can’t be set or agreed in advance (e.g. commissions, bonuses or overtime);

  • reimbursements of expenses;

  • statutory employer superannuation contributions. 

    Unfair Dismissal Claims

    Employees whose earnings are higher than $133,000.00 p.a. and who are not covered by an industrial instrument, are not protected from unfair dismissals, i.e. they are not able to bring an unfair dismissal claim.  Conversely, employees who are not covered by an industrial instrument, but whose earnings are equal to or less than this threshold amount, are able to bring an unfair dismissal claim.

    This increase does not affect employees whose terms and conditions of employment are governed or covered by an industrial instrument such as a Modern Award or Enterprise Agreement.  This class of employee can bring an unfair dismissal claim, irrespective of their income. 

    The compensation limit applicable to unfair dismissal claims has also been increased to $66,500.00.

    However, it is important to note that this high income threshold does not preclude any employees from bringing other claims, such as a “general protections”under the Fair Work Act 2009, or a discrimination claim under the relevant Federal or State legislation. 

    Coverage by a Modern Award

    Modern Awards will not apply to employees who have agreed to a written guarantee of annual earnings in excess of the new threshold (i.e. $133,000.00 p.a.) in accordance with the relevant provisions of the Fair Work Act 2009.

    However, this does not affect their entitlement, bring an unfair dismissal claim or, indeed, any other claim under the Fair Work Act, notwithstanding the fact that they would not otherwise be covered by the Modern Award. 

    Increases to Tax–Free Threshold for Bona Fide Redundancy Payments and ETP tax rate

    As from 1 July 2014, the tax-free threshold for bona fide redundancy payments was increased to $9,514.00 as a base limit and to $4,758.00 for each completed year of service. 

    The ordinary eligible termination payment (ETP) tax rate has also been increased to 32% or to 17% for those employees who are of preservation age or over.

    If an employee is entitled to a bona fide redundancy payment on termination, then accrued annual leave and/or long service entitlements will be taxable at the ETP tax rate (i.e. 32% or 17%, as the case may be).   

If you require any further information or clarification, or require any assistance regarding any of the issues covered or indeed any other Workplace Relations issues, please don’t hesitate to contact our Employment Law and Workplace/Industrial Relations Department: