Axing of tax credit unfair, say unions

EPMU secretary Andrew Little says the move was

Change of approach on redundancy pay 'another reduction in working conditions'

A tax credit on redundancy pay has been quietly axed in a Budget move unions are slamming as "unfair and unprincipled".

The credit of 6 per cent of redundancy pay, up to a maximum of $3600, was introduced after the Labour Government raised the top tax rate from 33 per cent to 39 in 2000.

It has been quietly abolished in the tax bill introduced on Budget night from October 1, when the top tax rate will come back down to 33 per cent.

Council of Trade Unions economist Bill Rosenberg said the tax credit applied to all incomes across the board, not just to workers whose redundancy pay pushed them into the top tax bracket for the year in which they were made redundant.

"It reflects the different nature of redundancy payments. They are not regular income; there is a degree of compensation there as well," he said.

"It was effectively something for people made redundant to increase the payout that they got. We would see removing it as another reduction in working conditions."

Engineering, Printing and Manufacturing Union secretary Andrew Little said the move was "unfair and unprincipled".

"Workers will be out of pocket once they are made redundant - the very time they need the cash - even though they can claim a rebate at a later date."

But Revenue Minister Peter Dunne said the tax credit was introduced to prevent redundancy pay being taxed at 39 per cent.

"With this tax rate being reduced to 33 per cent the original purpose of the tax credit no longer exists," he said.

The tax bill also abolishes a 5 per cent tax on some retired people cashing up their private superannuation funds where they were earning over $70,000 a year before retiring.

The tax was no longer needed because the top personal rate and the tax on employers' super contributions are now aligned at 33 per cent.