Dáil Éireann Debate, Thursday - 10 April 2025
161. Deputy Shónagh Ní Raghallaigh asked the Minister for Finance the correct and fair treatment of unpaid maternity leave in SCSB calculations; and if he will make a statement on the matter. [18218/25]
Amharc ar fhreagra162. Deputy Shónagh Ní Raghallaigh asked the Minister for Finance if he is a policy review to ensure maternity-related earnings are treated equitably in redundancy tax exemptions.; and if he will make a statement on the matter. [18219/25]
Amharc ar fhreagraI propose to take Questions Nos. 161 and 162 together.
The Standard Capital Superannuation Benefit (SCSB) is a relief from income tax arising from a lump sum payment connected with the termination of an employment. SCSB is computed at 1/15th of a taxpayer’s average annual pay for the last 36 months in employment. Annual pay in this regard means pay from the employer and does not include any benefits paid by the Department of Social Protection in the previous 36 months, for example, maternity benefit.
In cases where unpaid leave is taken and where there was no salary for a number of weeks in the previous 36 months, an individual is allowed to add other weeks (i.e. weeks from months 37, 38 or 39, etc.) when calculating the average salary over the last three years of continued service. Examples of such periods would include unpaid maternity leave, unpaid paternity leave and unpaid parental leave. This may provide for a higher level of income tax relief under the SCSB that would otherwise be available.
In relation to what the Deputy refers to as redundancy tax exemptions, statutory redundancy payments made under the Redundancy Payments Acts are exempt from income tax. However, ex-gratia payments received on leaving employment may be chargeable to tax under Schedule E, i.e., through the PAYE system. Section 123 of the Taxes Consolidation Act 1997 (TCA 1997) provides for the general tax treatment of payments on retirement or removal from office or employment.
Where an ex-gratia payment is chargeable to tax under Schedule E by virtue of section 123 TCA 1997, the payment may qualify for exemption from tax under section 201 TCA 1997 as follows:
1) Tax free basic exemption - a tax free amount of €10,160, plus €765 per complete year of service.
2) Tax free increased basic exemption - the basic exemption amount may be increased by an additional €10,000, which is available where an individual has not claimed any exemptions under section 201 TCA 1997 in the previous 10 years and is not a member of an occupational pension scheme.
3) Tax free SCSB - this is calculated as outlined above.
The calculation of income tax relief available to an individual in receipt of a termination lump sum payment through either the tax free basic exemption or the tax free increased basic exemption is not impacted by a period of maternity leave prior to the employment being terminated.
The exemptions available under section 201 TCA 1997 are subject to a lifetime limit of €200,000 and the individual may apply whichever of the three exemptions is more beneficial to them.
The Revenue website sets out further information on the tax treatment of lump sum termination payments in the hands of the employee, and that information is accessible at:
www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/lump-sum-payments/index.aspx.
Further information is available in Revenue’s Tax and Duty Manual Part 05-05-19 Payments on Termination of an Office or Employment or Removal from an Office or Employment at www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-05-19.pdf.
