A lump sum is a single payment of money, as opposed to a series of payments made over time (such as an annuity).
When you leave employment, you may receive lump sum payments for:
- unused annual leave
- unused long service leave.
In some financial situations, such as lottery winnings or retirement benefits, the recipient may have a choice between a smaller payment and a fixed payment issued over time (annuity).
An agency calculates a lump-sum payment by multiplying the number of hours of accumulated and accrued annual leave by the employee’s applicable hourly rate of pay, plus other types of pay the employee would have received while on annual leave, excluding any allowances that are paid for the sole purpose of retaining a Federal employee in Government service (e.g., retention allowances and physicians comparability allowances).
Your lump sum payout may make you a target for scams, particularly if reports of coming payments have been in the news. You should be particularly wary if someone approaches you, instead of the other way around, to discuss what to do with the money.
If you pay a lump-sum payment (such as a refund of premiums) to a deceased annuitant’s spouse or common-law partner, do not deduct income tax.
Payments for over 60s are not taxed, and a person who was doing a transition to retirement pension, in a way that reduced their taxable income below $50,000, would not pay any levy.