There’s an important change in how ACIRT will deduct tax from benefit payments to our members, effective July 1, 2025. As an employer whose employees are ACIRT members, we believe it’s crucial for you to be aware of these changes and understand their potential impact on your workforce.
Why are these changes happening? Understanding the ATO’s position.
ACIRT has always operated in strict adherence to Australian tax law. Earlier this year, the Australian Taxation Office (ATO) clarified its view on how tax law applies to benefit payments made by severance funds like ACIRT, particularly regarding the concessional tax treatment for “genuine redundancy” payments.
The ACIRT Board, management, and our professional advisers have thoroughly reviewed this ATO clarification. As a result, we must adjust our tax deduction practices to ensure ongoing compliance and to protect the long-term integrity and fairness of the fund for all members.
Key Impacts on Your Employees (ACIRT Members)
The primary impact relates to how tax is applied to their ACIRT payments, particularly around genuine redundancy.
- For Genuine Redundancy Claims: If an employee’s claim for ACIRT benefits is based on a genuine redundancy, and ACIRT receives that claim by 5 PM, Eastern Standard Time on Monday, June 30, 2025, it may still be eligible for the concessional tax treatment that has applied previously. We strongly encourage any employees who believe they have a genuine redundancy claim and intend to access their ACIRT benefit to submit their claim well before this date. Members will still require confirmation from their current employer that they have been made genuinely redundant.
- New Tax Withholding Rules will apply for claims received after 1 July 2025):For all claims processed on or after July 1, 2025, tax will be deducted under two new scenarios:
- 1. Payments within 12 months of employment termination: These payments will now be subject to Employment Termination Payment (ETP) rates. This means:
- If the employee is under their Superannuation Preservation Age: 30% tax plus Medicare Levy.
- If the employee is over their Superannuation Preservation Age: 15% tax plus Medicare Levy.
- (Note: These rates are subject to the ETP cap, which for 2024-25 is $245,000, and is indexed annually).
- 2. Payments after 12 months from employment termination: These payments are not considered ETPs. They will be assessed as ordinary assessable income and taxed at marginal tax rates. As ACIRT cannot determine an individual employee’s marginal tax rate, we are required to use the PAYG withholding rates per ATO publication ‘NAT 1005’. This typically results in a higher withholding rate.
- 1. Payments within 12 months of employment termination: These payments will now be subject to Employment Termination Payment (ETP) rates. This means:
What Does This Mean for You as an Employer?
While ACIRT is required to withhold tax on claims by members, your role in supporting your employees’ understanding is invaluable.
- Directing Staff: We kindly request that you inform your employees about these upcoming changes. Encouraging them to read the ACIRT communications (website, emails, letters) and to attend our worksite visits will be highly beneficial.
- Redundancy Processes: When processing genuine redundancies, please be mindful of the June 30, 2025 deadline if your employee wishes to seek the previous concessional tax treatment through ACIRT.
- Employee Inquiries: You may receive questions from your employees about these changes. We encourage you to direct them to call ACIRT directly on 1800 060 467 or direct them or to the dedicated information on our website.
Our Commitment to Members and Stakeholders
These adjustments are essential for ACIRT to remain compliant with ATO rulings and to safeguard the fund for the future. Despite these changes, we want to reiterate that members will continue to receive 100% of their account balance when a valid claim is made, and their annual distributions will also continue as usual.
Over the coming months, ACIRT staff will be visiting worksites and delegates’ meetings to further explain these changes directly to members and to answer their questions. We would appreciate your support in facilitating these visits where possible.
Thank you for your ongoing partnership and understanding.
Sincerely,
The ACIRT Board and Management