Mid Year Economic & Fiscal Outlook (MYEFO)
The Government has released its half-yearly Budget update, the Mid-Year Economic and Fiscal
Outlook (MYEFO). The MYEFO confirms measures already announced and includes some new
measures. Newly announced measures with direct relevance to personal financial advice are
discussed below. Please note that some of these measures require legislation to be passed before
they can become effective.
Fairer redundancy and early retirement scheme payments:
Currently, a person whose position of employment is made redundant or who participates in an early
retirement scheme is not entitled to any tax-free amount of their redundancy payout if they are age 65 or
more when the termination of employment occurs. The tax-free amount is $10,399 plus $5,200 for each
completed year of service when the payment occurs in 2018-19. If the person is not entitled to a tax-free
amount, the whole of the termination payment is taxed as an employment termination payment (ETP),
generally at up to 15% for someone in this age group (plus Medicare levy) for a genuine redundancy
payment of up to $205,000 in 2018-19.
Eligibility for the tax-free amount on genuine redundancy and early retirement scheme payments will be
aligned with the Age Pension age. This measure will come into effect for employment terminations
occurring from 1 July 2019. At that point, the Age Pension qualifying age will be 66 for those born from 1
January 1954 to 30 June 1955. The Age Pension qualifying age is legislated to progressively increase to
age 67 by 1 July 2023.
This measure will ensure that older Australians receive a greater amount of their redundancy payment
Concessional tax treatment also applies to unused annual and long service leave amounts when these
are paid out in connection with a redundancy or early retirement scheme. This concessional treatment is
also limited to those below age 65 at the time the employment termination occurs, the MYEFO papers are silent on this issue. This issue may be addressed when legislation is introduced.