Issue

You have received a Death Benefit Employment Termination Payment (ETP) and would like to know how to enter the associated PAYG Withholding (PAYGW) tax credits in LodgeiT.

Explanation

Under Australian Taxation Office (ATO) guidelines, a deceased estate cannot directly claim or retain Employment Termination Payment (ETP) tax credits.

Where an ETP is paid to a trustee (Code T):

  • The ETP income must be included in the deceased estate or trust return as appropriate.
  • The associated PAYG withholding credits cannot be claimed by the deceased estate.
  • Instead, both the income and the corresponding PAYG withholding credits must be distributed to the beneficiaries.
  • Each beneficiary will then claim their allocated share of the PAYG withholding tax credit in their own Individual Tax Return (ITR).


What to Do in LodgeiT

  1. Record the ETP income in the relevant estate or trust return.
  2. Allocate the income to the appropriate beneficiaries through the distribution process.
  3. Ensure the related PAYG withholding credits are distributed in the same proportions as the income entitlement.
  4. The beneficiaries should then include their allocated PAYG withholding credits in their Individual Tax Returns (ITRs).


Important Note

LodgeiT follows ATO reporting requirements and does not support claiming ETP tax credits directly within a deceased estate return. The tax credits must be passed through to the beneficiaries, who will claim them in their individual returns.


Reference

For ETPs paid to a trustee (Code T), the ATO requires the associated income and PAYG withholding credits to be distributed to beneficiaries, as a deceased estate cannot directly claim these tax credits.