{"id":5567,"date":"2021-03-04T14:55:51","date_gmt":"2021-03-04T03:55:51","guid":{"rendered":"https:\/\/mnygroup.wpengine.com\/?p=5567"},"modified":"2025-02-01T18:47:03","modified_gmt":"2025-02-01T07:47:03","slug":"unexpected-lump-sum-payment-in-arrears","status":"publish","type":"post","link":"https:\/\/mnygroup.com.au\/en\/unexpected-lump-sum-payment-in-arrears\/","title":{"rendered":"Unexpected lump sum payment in arrears? There\u2019s a tax offset for that!"},"content":{"rendered":"<nav aria-label=\"breadcrumbs\" class=\"rank-math-breadcrumb\"><p><span class=\"last\">Home<\/span><\/p><\/nav>\n<p><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-5568 aligncenter\" src=\"https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/03\/Unexpected-lump-sum-payment-in-arrears-e1614828004109-1024x478.png\" alt=\"Unexpected lump sum payment in arrears? There\u2019s a tax offset for that!\" width=\"923\" height=\"431\" \/><\/p>\n<p><span style=\"color: #000000;\">A lump sum payment in arrears is a payment you may receive that relates to earlier income years. The tax offset that can be utilised with these sorts of payments works to alleviate the problem of a taxpayer being expected to pay more tax in a year when a lump sum of back payments is received \u2014 where they would be disadvantaged by paying more tax than if the income had been spread over several income years.<\/span><\/p>\n<p><span style=\"color: #000000;\">The general rule is that employment income is assessable in the income year it is received, regardless of the period the payment covers. This is still the case, however the tax offset works to restrict the amount of tax payable to the same \u201cmarginal\u201d rate that would have applied if it were \u201creceived\u201d in the tax year or years it relates to.<\/span><\/p>\n<p><span style=\"color: #000000;\">As the lump sum payment in arrears (LSPIA) is taxable in the year you receive it, it can impact your tax and non-tax entitlements such as:<\/span><\/p>\n<ul>\n<li><span style=\"color: #000000;\">student loans<\/span><\/li>\n<li><span style=\"color: #000000;\">child support and welfare payments.<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #000000;\">You may also find that as a result you:<\/span><\/p>\n<ul>\n<li><span style=\"color: #000000;\">are in a higher tax bracket and pay more tax than you would have if you received the amount when you earned it<\/span><\/li>\n<li><span style=\"color: #000000;\">are in the same tax bracket and pay the same amount of tax as you would have if you received the amount when you earned it<\/span><\/li>\n<li><span style=\"color: #000000;\">are in a lower tax bracket and pay less tax than you would have if you received the amount when you earned it.\u00a0<\/span><\/li>\n<li><span style=\"color: #000000;\">have a new or increased Medicare levy surcharge obligation, because the lump sum pushes you over a Medicare levy surcharge threshold.<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #000000;\">The ATO says taxpayers may be able to access the tax offset for certain payments, which usually relate to employment, compensation or welfare payments. To be eligible for the tax offset, a LSPIA must be 10% or more of your taxable income in the year of receipt after you deduct any:<\/span><\/p>\n<ul>\n<li><span style=\"color: #000000;\">amounts that accrued in earlier years (that is, this payment)<\/span><\/li>\n<li><span style=\"color: #000000;\">amounts received on termination of employment in lieu of annual or long service leave<\/span><\/li>\n<li><span style=\"color: #000000;\">employment termination payments (ETPs)<\/span><\/li>\n<li><span style=\"color: #000000;\">income stream and lump sum superannuation payments<\/span><\/li>\n<li><span style=\"color: #000000;\">net capital gains<\/span><\/li>\n<li><span style=\"color: #000000;\">any taxable professional income that exceeds the average taxable professional income.<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #000000;\">The ATO notes that the calculation of this tax offset is complex, therefore, there is no online calculator.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><strong><span style=\"color: #000000;\"><em>Related Link:<\/em><\/span><\/strong><\/p>\n<p><em><a href=\"https:\/\/www.ato.gov.au\/Individuals\/Income-and-deductions\/Offsets-and-rebates\/Lump-sum-payments-in-arrears-tax-offsets\/\" target=\"_blank\" rel=\"noopener\">Lump sum payments in arrears tax offsets<\/a><\/em><\/p>\n<p style=\"text-align: center;\"><strong><a href=\"https:\/\/mnygroup.com.au\/\">www.mnygroup.com<\/a><\/strong><\/p>\n<p><span style=\"color: #999999;\"><em>This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.<\/em><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A lump sum payment in arrears is a payment you may receive that relates to earlier income years. The general rule is that employment income is assessable in the income year it is received, regardless of the period the payment covers.<\/p>\n","protected":false},"author":18,"featured_media":5568,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1692],"tags":[1468],"class_list":["post-5567","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-tax","tag-tax","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-20"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/5567","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/comments?post=5567"}],"version-history":[{"count":0,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/5567\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media\/5568"}],"wp:attachment":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media?parent=5567"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/categories?post=5567"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/tags?post=5567"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}