Income Tax Assessment Act 1997
You cannot deduct under this Act a loss or outgoing for long service leave, annual leave, sick leave or other leave except:
(a) an amount paid in the income year to the individual to whom the leave relates (or, if that individual has died, to that individual's dependant or * legal personal representative); or
(b) an * accrued leave transfer payment that is made in the income year. 26-10(2)
An accrued leave transfer payment is a payment that an entity makes:
(a) in respect of an individual's leave (some or all of which accrued while the entity was required to make payments in respect of the individual's leave, or leave the individual might take); and
(b) when the entity is no longer required (or is about to stop being required) to make payments in respect of such leave; and
(c) to another entity when the other entity has begun (or is about to begin) to be required to make payments in respect of such leave; and
(d) under (or for the purposes of facilitating the provisions of) an * Australian law, or an award, order, determination or industrial agreement under an * Australian law.
It does not matter whether the leave accrues to the individual as an employee or for some other reason.
Your employee goes to a new employer. You pay the new employer $2,000 for the employee's unused long service leave because an industrial agreement requires you to make that payment.
An accrued leave transfer payment is included in the assessable income of the entity to which it is made: see section 15-5 .