Stay updated on the ATO mandated severance change to be introduced in 2025
We're rolling out communications to all Protect severance members advising of an administrative change to your account.
In a nutshell, the Australian Taxation Office (ATO) now requires us to hold two severance account types from 31 March 2025. All members will be placed in the default General Account (GEN) allowing for tax free redundancy claims. If you plan to retire or resign, you can switch to the new Voluntary Termination Account (VTA). No action is required for GEN, but if you plan to leave employment on your own terms, a quick account change lets you access your benefits just as smoothly.
Key points
- The ATO has changed its view on how tax law applies. This means Protect will introduce two severance account types from 31 March 2025
- Introducing two account types keeps your claiming options open
- All Protect severance accounts will be changed to a ‘General Account’ (GEN)
- GEN operates as usual, your membership number stays the same and you don’t have to do anything
- There will be no change to tax free genuine redundancy claiming from your General Account
- Claims you cannot make from the General Account fall under the category of ‘voluntary termination’. These include resignation, retirement and promotion off the tools claims
- If you choose to voluntarily terminate your employment and make a taxable claim on your Protect funds, there will be a quick step online to permanently change your account type to ‘Voluntary Termination Account’ (VTA)
ATO ruling change
As Australia’s leading severance fund, we’ve always played by the rules. We obtain a Protect specific Australian Tax Office ruling that determines how we manage your account.
We do this because tax associated with severance employment benefits, affects you. The security of a water tight ruling means that you’re not going to be concerned if there are ever any tax office queries about your severance or redundancy claim.
If you’re with Protect, you’re in safe hands.
We apply for a ruling every few years. This year the ATO has changed its position on existing arrangements. As of 31 March 2025, the ATO requires a clear distinction between redundancy accounts and voluntary termination accounts. Meaning you can no longer claim for any reason from the one account type. So we have an administrative change to make...
Two account types
If you’ve been a Protect member for a while, you’ll remember that we’ve had two account types before, however it’s different this time. Easier. You’re unlikely to notice much of a difference unless you want to voluntarily leave employment to claim for resignation, retirement or promotion off the tools.
No change to tax free redundancy
Making a difference
To ensure a distinction between redundancy payments and voluntary termination payments for the ATO, you can only hold one type of account at a time, General or Voluntary Termination.
Both accounts make payment for total and permanent disability and death (via beneficiaries)
1. GENERAL ACCOUNT (GEN)
This is the default option. Every member’s account will become a General Account from 31 March 2025. Your membership number stays the same and you don’t have to do anything.
GENERAL ACCOUNT CLAIMS PAID:
- Redundancy
- Non Voluntary Termination
(such as dismissal or end of contract)
Unless you’re ready to resign, retire or you’re promoted, you will stay in the General Account.
2. VOLUNTARY TERMINATION ACCOUNT (VTA)
If you choose to leave your employment you must elect to change to a Voluntary Termination Account. This election will form part of your claim process. There is no waiting period and your claim will be processed in the usual time period.
VOLUNTARY TERMINATION ACCOUNT CLAIMS PAID:
- Resignation
- Retirement
- Promotion off the tools
VTA election is permanent
Changing to VTA is a permanent election that cannot be reversed. If your Voluntary Termination Account remains open, any future contributions will be allocated to that account and can only be accessed with another resignation claim or on retirement, not redundancy.
SUPPORT IS AVAILABLE While the change is being introduced, our teams will discuss your options with you at any point you elect to change account types.
Claiming
Our systems will reflect the new account types and submitting a claim will remain as simple as always. Use the Protect App or log in to your account via the workers portal to submit a claim. Changing your account to VTA will form a new step before you claim. You won’t be able to miss it!
NOT RESIGNING OR RETIRING?
STAY IN THE GENERAL ACCOUNT NO ACTION REQUIRED
One of the most appreciated features of a Protect severance account is the tax free component of a genuine redundancy claim. Because redundancy can happen without notice it makes sense to start everybody in the account type that allows for redundancy claims - GEN. When resignation or retirement is on your mind, you have plenty of time to change account type and elect for a VTA at the time of claiming.
NOTE: There is no change to the tax applied to each claim type. Genuine Redundancy is the only claim that attracts a tax free component.
FAQs
I’m not choosing to end my employment, do I have to do anything?
No. No action is required to stay in the default General Account.
Can I still make a tax free genuine redundancy claim?
Yes, absolutely. Stay in the default GEN account to claim redundancy.
Why is GEN the default account?
Redundancies can happen at short notice. With a GEN account you remain eligible for a tax free payment without needing to change anything.
What is a voluntary termination?
Voluntary termination is where you make a choice to end your employment such as resignation, retirement or accepting a promotion to a role off the tools.
When do I elect to change accounts if I want to resign or retire?
Changing to a VTA account will be an option for you on both the Protect App and online workers portal before you submit a claim. The change is automatic on request and there is no waiting period. While the change is being introduced, our teams will discuss your options with you at any point you elect to change account types.
Does this change affect my Protect Income Protection?
No. Income Protection Insurance is not affected by the latest tax ruling.
Who can I speak to for more information
Our Field Officers and Member Services Team are available to assist you with any queries. Call us on 1300 344 249.
Here for you
Our Member Services Team is available to answer all queries relating to your Protect account. Protect Field Officers can also visit your site to present on the new account types. Give us a call on 1300 344 249 to arrange.