AVC drawdown implications

brisan

I have an AVC pot of roughly 200,00
I am considering taking 30% of this as a draw down before 27th March.
i know i will pay tax at 40% and no USC or PRSI.
Question is I may be taking voluntary redundancy ( approx 270,000)early next year and I want to know if the 60,000 draw down can be used as income for SCSB purposes for calculating my tax free allowance on the ex gratia payment part of the redundancy package.Approx 230,000
Example
A =Average pay over the last 3 years is 92,000 without draw down considered
B = 35 full years service
C= Amount taken as a tax free sum from an approved pension scheme
AxB/15-C =TAX FREE ALLOWANCE
In this case
9200 x 35 /15 =214,666 so i could take 214,666 tax free from my AVCs to give me the maximum tax free allowance of 200,000 on the ex gratia portion of the package
Revenue consider the draw down as schedule E income and tax it as such,and the financial institution will issue a P45 in respect of the payment.
Will my employer be allowed to add the 60,000 draw down to my previous 3 years salary to increase my SCSB calculation as below

A=112(92,000+20,000)
B =35

112,000 X 35 /15=261,333
This would allow me to take 61,333 (46,667) as a tax free payment from my AVCs and still keep a TFA OF 200,000 for the ex gratia payment
Hoping someone can tell me whether this is possible and if I am on the right track as my employer has no idea as of yet
Thanks in advance

brisan

Sorry boards wont allow me edit,but the first line should have said "an AVC pot of 200,000 not 20000

psnKOB79LFC

I know the answer but why tell you. Pay an accountant, you can afford it. If you don't feel it is worth it, take your chances.

brisan

psnKOB79LFC wrote: »

I know the answer but why tell you. Pay an accountant, you can afford it. If you don't feel it is worth it, take your chances.

Thank you for taking the time out of your busy day to post such an informative and helpful answer
I'd say carrying that green eyed monster around on your back gets a little tedious at times

Lockedout2

You have AVCs so you have an employers pension. What is the value of the tax free lump sum from this?

The withdrawal from the AVC is not emoluments from employment so can't be used in the SCSB.

The SCSB will be reduced by the tax free elements of the pension to a max of €200k.

brisan

The tax free lump sum from the pension is approx 120,000 but this will impact on scsb
SCSB at the moment is about 210000
The idea is to take as much as possible from the ex gratis payment tax free 200,00 plus statutory
Ideally then take as much as possible from AVC tax free
That's why if the drawdown is added to earnings it would be beneficial as per the example posted above

brisan

This is taken from the revenue website regarding the AVC drawdown

What are the income tax implications of exercising the option?
The amount transferred to you by your fund administrator is treated as emoluments to which Schedule E applies and tax is collected at source under the PAYE system by the administrator.

Will this have an impact on the SCSB

barneystinson

brisan wrote: »

This is taken from the revenue website regarding the AVC drawdown

What are the income tax implications of exercising the option?
The amount transferred to you by your fund administrator is treated as emoluments to which Schedule E applies and tax is collected at source under the PAYE system by the administrator.

Will this have an impact on the SCSB

It's treated as emoluments and PAYE is operated on it, BY THE FUND ADMINISTRATOR. Therefore it is clearly not, and cannot be, part of your earnings in the employment to which the SCSB calculations relate.

It's not clear to me what you're not clear about?

It's no different than if you had a 2nd job working weekend shifts in a factory - that PAYE income would also not have anything to do with calculating the SCSB.

Lockedout2

AxB/15-C =TAX FREE ALLOWANCE
In this case
9200 x 35 /15 =214,666

So it's 92,000 x 35/15 - 120,000. = €94,666 tax free element of the ex gratis payment.

I think you are missing the point that the tax free lump sum reduces the SCSB.

You can't get €214,666 tax free from your AVC and €120,000 from your employer pension and €200,000 on the ex gratis.

brisan

I understand that any lump sum taken from the pension reduces the SCSB
The whole point is to take as much as possible of the ex gratia payment tax free
and leave the AVCs to be taken from an ARF at a later date
Imputed distribution of 4% plus pension will push me slightly into 40% tax bracket so the idea is to take as much as possible from AVC fund and try and only pay 20% tax on as much of the remainder as possible
Thank you for clearing up that that the AVC drawdown cannot be added to earnings