ATO Interpretative Decision

ATO ID 2002/346 (Withdrawn)

Superannuation

• This ATO ID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is part of the ETP an invalidity payment under section 27G of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

No, the ETP does not contain an invalidity payment under section 27G of the ITAA 1936?

Facts

The taxpayer's employment with the employer was terminated. The termination occurred because the employer considered, based on medical reports obtained, the ill-health of the taxpayer was likely to result in the taxpayer being unable to resume duties within a reasonable time.

Two legally qualified medical practitioners prepared medical reports attesting to the extent of the taxpayer's medical condition.

The taxpayer was paid an amount. The entire amount was taxed as the post-June 83 component of an ETP.

Reasons for Decision

Under section 27G of the ITAA 1936, a payment made after 1 July 1994 qualifies as an 'invalidity component' provided an ETP is made in consequence of the termination of the taxpayer's employment and the termination of the taxpayer's employment occurred because of the disability of the taxpayer, where two legally qualified medical practitioners have certified the disability is likely to result in the taxpayer being unable ever to be employed in a capacity for which the taxpayer is reasonably qualified because of education, training or experience. The termination must also occur before the last retirement date in relation to the employment.

A person, who is unable to continue to perform the duties of his or her current employment, but is able to undertake other appropriate employment for which they are reasonably qualified, would not satisfy the condition in sub-subparagraph 27G(b)(i)(B) of the ITAA 1936.

Similarly, the requirement that the disability is likely to result in the taxpayer being unable ever to be employed in a capacity for which they are reasonably qualified extends not only to full-time employment but also part-time or casual employment. A person who is not able to work full-time but is able to work part-time or casual in any employment for which the taxpayer is reasonably qualified will not have access to the concession.

In this case, the taxpayer's employment was terminated because of the disability of the taxpayer and an ETP was paid in consequence. However, the two medical reports do not certify that the disability is likely to result in the taxpayer being unable ever to be employed in a capacity for which the taxpayer is reasonably qualified because of education, training and experience. The first states his disability may be aggravated by returning to work full-time with his employer. The second assesses his disability as a percentage.

As all the requirements of section 27G of the ITAA 1936 have not been satisfied, the ETP does not contain an invalidity component.

Year of income:  Year ended 30 June 2000

Legislative References:
Income Tax Assessment Act 1936
   Subsection 27A(1)
   Section 27G
   Paragraph 27G(a)
   Paragraph 27G(b)

Related Public Rulings (including Determinations)
TR 96/13

Other References:
Explanatory Memorandum to the Taxation Laws Amendment (Superannuation) Bill 1992

Keywords
Eligible termination payments
ETP post June 1994 invalidity component
ETP invalidity payments

Business Line:  Superannuation

Date of publication:  28 March 2002

ISSN: 1445-2782