From 01 April 2025, the calculation to obtain the Annualised Earnings is updated to cater for the new method specified in the Business Rules Specification 2026.
For Termination pay item categories marked with a Special Tax Rate of Lump Sum Payments, we calculate the Annualised Income amount by summing the standard taxable pay items for the last two fully paid pay periods. Any full pay periods where the employee was on unpaid leave and therefore the earnings are $0.00 are disregarded.
Depending on the pay calendar, it will multiply by the following to obtain an annual amount:
Weekly, multiply by 26
Fortnightly, multiply by 13
Monthly, multiply by 6
Quarterly, multiply by 2
Using the annual amount, the relevant tax rate is determined to calculate the payment against.
Note: If the annualised amount is not able to be determined, then a payroll message will be displayed advising to calculate this amount manually.
In some cases, the employee may not have two prior pay periods to draw upon. In such cases, the employee could choose to notify their employer of their tax code as per section RD 10 of the ITA based on their expected taxable income for the income year.
Example:
