Leaving a job often comes with more than just goodbye emails; it can include lump sum payments that affect your tax return. One such payment is an Employment Termination Payment (ETP), and how you report it matters.

Here’s what every Australian employee should know before lodging their tax return in 2025.

An Australian employee reviewing income statement and PAYG payment summary documents while lodging a tax return on the myGov website illustrating how to handle Employment Termination Payments (ETPs) when leaving a job in 2025.

Understand Your ETP and Tax Documents

After leaving your job, your employer is required to give you either:

  • An Income Statement (if they report via Single Touch Payroll – STP), or
  • A PAYG Payment Summary – ETP (if they don’t use STP)

These forms will show the amount paid, tax withheld, and a special ETP code that determines how much tax you’ll owe (or save).

Income Statement (STP Reporting)

If your employer reports using STP, your Income Statement will:

  1. Be available via your myGov account under ATO online services
  2. Include all ETP taxable components, codes, and tax withheld
  3. Automatically pre-fill your tax return once marked as “Tax Ready”

 Tip: Always review your pre-fill data before submitting. Don’t just assume it’s correct.

PAYG Payment Summaries (Non-STP Employers)

If your employer doesn’t use STP, you’ll receive one or both of the following:

1. PAYG Payment Summary – Individual Non-Business

Shows:

  • Lump Sum A or B: Unused annual or long service leave, Not part of ETP but taxed concessionally
  • Lump Sum E: Return-to-work or earlier year income
  • Lump Sum D: Tax-free redundancy/early retirement. This portion is not assessable and doesn’t go in your return

2. PAYG Payment Summary – Employment Termination Payment

Must be given to you within 14 days of the ETP payment date. It includes:

  • Taxable component of your ETP
  • The ETP code
  • The tax withheld

What Do ETP Codes Mean?

The ETP code tells the ATO how to apply tax caps and calculate your refund or liability. Here’s how:

  • Code O or P = Whole-of-income cap applies
    ➤ If you earn extra income post-termination, it may reduce your ETP tax concession.
  • Other codes = Standard ETP cap (higher limit, more tax savings)

The ATO uses these codes to auto-calculate your tax. You just need to enter them correctly when filing.

What Not to Report

  • Any tax-free component (like the tax-free part of a genuine redundancy) doesn’t go into your return.
  • Don’t re-enter amounts already reported by STP unless corrections are needed.
  • Never assume all lump sums are taxable some may reduce your total taxable income.

Final Tips for Lodging Your Tax Return with an ETP

  • Use the exact figures from your income statement or payment summary
  • Review ETP caps and rules  they change yearly
  • File online via myGov or with a registered tax agent
  • Lodge early if your income is simple, but double-check everything if you had multiple employers or payments

Need Help?

Not sure how to enter your ETP details? Need to fix an incorrectly lodged return? Tax NextGen helps Aussies like you file, amend, and maximize your tax returns  even if you’ve already lodged with someone else.