The Lump Sum Tax Offset represents a reduction in tax payable on certain lump sum payments, calculated as the difference between tax calculated at the individual’s marginal rate and a flat rate of 30%. This offset applies specifically to:
- Employer lump sum payments (Category 3),
- Employment termination payments (Category 4),
- Australian superannuation lump sum payments (Category 8).
Calculation Details
The calculation of the Lump Sum Tax Offset is complex and is based on ATO legislation and official formulas. The offset is computed as:
Tax on taxable income excluding the lump sum
minus
Tax on taxable income including the lump sum calculated at a 30% flat rate.
LodgeiT uses a proprietary algorithm designed to closely follow the ATO calculation to estimate the offset amount.
Important Points:
- The Lump Sum Tax Offset amount cannot be manually edited in LodgeiT to maintain compliance with ATO standards.
- Users who believe the calculated offset is incorrect may proceed with lodgement. The Australian Taxation Office (ATO) will send a Notice of Assessment (NoA) typically within 1–2 weeks after lodgement, which contains the official amount.
- If a discrepancy exists between the LodgeiT estimate and the ATO calculation, users are encouraged to supply supporting documentation for further investigation. Required information includes:
> Detailed calculations and relevant legislative or ATO references,
> Copies of relevant tax forms,
> URLs to official forms or resources.
- Non-Taxable Lump Sum Amounts - The Lump Sum D amount is not taxable and therefore does not require reporting in the Income Tax Return (ITR) form.
Please assist us in further reviewing this matter by providing the following supporting information:
1. Detailed calculations accompanied by relevant legislative or ATO references.
2. Copies of the applicable tax forms or downloads.
3. URLs to official forms or authoritative resources.
- Form URL's
Sample - https://go.lodgeit.net.au/organisations/724446/tax/forms/4174664/Estimate
Include any references to legislative or ATO website sources that describe the formula or algorithm used for the calculation.
Important Note:
The lump sum tax offset value in LodgeiT cannot be manually amended. If you believe the calculated amount is incorrect, you may proceed with lodgement and await the Notice of Assessment (NoA) from the ATO, usually received within 1-2 weeks post-lodgement. Should the ATO assess a different amount, please forward the details to us for investigation.
Additionally, the Lump Sum D amount reflects the tax-free component of a genuine redundancy or early retirement payment and is not required to be reported in the Income Tax Return (ITR) form because it is not taxable.
Related link: ATO Superannuation Threshold