BRANSON v FC of T

Judges:
Emmett J

Court:
Federal Court, Sydney

MEDIA NEUTRAL CITATION: [2008] FCA 1874

Judgment date: 1 December 2008

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Emmett J

1. This proceeding is concerned with the operation of ss 27A(1) and 27CD of the Income Tax Assessment Act 1936 (Cth) ( the Assessment Act ). Those provisions afford an exemption to a taxpayer in respect of certain foreign termination payments made to the taxpayer.

2. Section 27CD of the Assessment Act relevantly provided that, if an exempt non-resident foreign termination payment is made in relation to a taxpayer, the taxpayer's assessable income does not include that payment. The term exempt non-resident foreign termination payment is defined in s 27A(1) of the Assessment Act as meaning, relevantly, a payment made in respect of a taxpayer to which the following apply:

• (i) the payment is made in consequence of the termination of that taxpayer's employment;
• (ii) the payment would be an eligible termination payment;
• (iii) that employment was service in a foreign country; and
• (iv) the payment related solely to a period of the employment during which that taxpayer was not a resident of Australia.

3. The applicant, Mr Michael Branson ( the Taxpayer ), received a payment on 1 May 2003 from Deutsche Australia Limited ( Deutsche Australia ). The payment was made following the termination of his employment by Deutsche Australia upon his redundancy. At the time of the termination, the Taxpayer had been on secondment in Tokyo, Japan with Deutsche Securities Limited ( Deutsche Securities ), a company related to Deutsche Australia.

4. The payment made to the Taxpayer on 1 May 2003 was the sum of $535,068.03. That sum was made up as follows:

Repatriation allowance:	$23,875.00
Annual leave:	$125,307.35
Long service leave:	$125,277.85
14 month termination payment ( the Redundancy Payment ):	$497,068.83
Total:	$771,529.03
Less income tax deducted:	$236,461.00
Net payment:	$535,068.03

5. At the same time as that payment was made to the Taxpayer by Deutsche Australia, Deutsche Securities also made a payment to the Taxpayer of $595,040.17. That sum was made up as follows:

Guaranteed bonus for 2002 calendar year:	$700,000.00
Less tax:	$140,00.00
Net payment (AUD):	$560,000.00
Net payment annual leave - Japan accrual (calculated in JPY then converted to AUD)	$35,040.17
Net payment:	$595,040.17

THE ASSESSMENT

6. The Taxpayer claimed, relevantly, that, by reason of the operation of s 27CD, his assessable income for the relevant tax year did not include the amount of the Redundancy Payment of $497,068.83. Following an unfavourable objection decision by a delegate of the respondent, the Commissioner of Taxation ( the Commissioner ), the Taxpayer sought review of that decision by the Administrative Appeals Tribunal ( the Tribunal ). On 24 January 2008, the Tribunal affirmed the Commissioner's decision that the Taxpayer's assessable income included the amount of the Redundancy Payment. The Taxpayer then appealed to the Federal Court pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ( the Tribunal Act ).

THE EVIDENCE BEFORE THE TRIBUNAL

7. The Taxpayer was employed by Deutsche Australia from June 1992. In 2000, he agreed to be seconded to the Tokyo branch of Deutsche Securities. The terms of the secondment were evidenced by a letter of 28 July 2000 to the Taxpayer from Deutsche Bank AG and a letter of 9 August 2000 to the Taxpayer from Deutsche Securities.

8. The letter of 28 July 2000 confirmed the Taxpayer's assignment to Deutsche Bank, Tokyo. The letter stated that, during the period of the assignment, the terms contained in the letter were to prevail over any of the Taxpayer's terms of employment with Deutsche Australia that may be inconsistent with any of the terms of the letter. The letter stated further that the Taxpayer's employing company would continue to be Deutsche Australia throughout the assignment. The letter dealt with the expected period of assignment, the Taxpayer's remuneration and incidental matters such as transportation and relocation allowances. The letter of 9 August 2000 confirmed the Taxpayer's assignment to Deutsche Securities and dealt with the date of commencement and the duration of the assignment, the salary payment to be made by Deutsche Securities and other incidental matters concerning the terms of the secondment.

9. On 14 October 2002, while still on secondment pursuant to those arrangements, the Taxpayer was informed by a representative of Deutsche Australia that his position had become redundant. Because of the termination of the Taxpayer's employment with Deutsche Australia, his assignment with Deutsche Securities was also terminated. Thus, the Taxpayer worked in Tokyo from 1 August 2000 to 15 October 2002 and was resident in Japan for the whole of that time. The Taxpayer returned to Australia on 22 December 2002.

10. On 17 October 2002 the Taxpayer was informed by telephone that he would be paid an amount in lieu of notice equal to three months' salary. The Taxpayer responded that that was totally unacceptable and was not consistent with his understanding of the practice of Deutsche Australia.

11. On 5 November 2002 Deutsche Bank AG wrote to the Taxpayer setting out the termination payment, repatriation and other arrangements arising as a consequence of the Taxpayer's redundancy, effective 15 October 2002. The termination payment was to include a sum in Australian dollars and another sum in Japanese yen. The Australian dollar amount included the sum of $262,625 as a termination payment equal to 11 months' salary. The Japanese yen payment included a payment in yen of 2.5 months' notice. The letter stated the "home shadow salary" on which the Australian dollar amounts had been calculated. The letter also stated that the 2.5 month notice period payment had been calculated at the Taxpayer's net salary rate in yen.

12. On 18 November 2002 the Taxpayer's solicitors wrote to Deutsche Australia saying that the termination payments proposed in the letter of 5 November 2002 reflected only part of the Taxpayer's lawful entitlements. The letter then recited the employment history of the Taxpayer with Deutsche Australia and his secondment to Japan. It also stated the details of bonuses and salaries received while on secondment to Japan. The letter went on to assert that, since there was no express agreement between Deutsche Australia and the Taxpayer as to the length of notice required to terminate his employment, he was entitled to reasonable notice. The letter then asserted as follows:

Given our client's length of service, relocation on assignment, current location, experience, seniority, the expected period of time it would take him to find alternative employment (having regard to the deterioration in market conditions), notice of 18 months would be reasonable. A payment of three months' notice is insufficient.

The letter went on to demand a payment in lieu of reasonable notice calculated on the basis that the reasonable notice period was 18 months. The letter asserted that the proposed redundancy payment of 11 months' base monthly salary based on the Taxpayer's Australian shadow salary did not reflect his entitlement at law.

13. Deutsche Australia's solicitors replied on 9 December 2002. After reciting various contentions and arguments, the letter made an offer on behalf of Deutsche Australia to make a payment of a sum in Australian dollars representing an actual payment or payment in lieu of a total of 14 months' salary. The payment was to be in full and final satisfaction of any entitlements that the Taxpayer may have "to notice of termination and redundancy pay". That proposal is consistent with the proposal in the letter of 5 November 2002. That is to say, the 14 month calculation involved 11 months' redundancy pay and three months' payment in lieu of notice.

14. The proposal for redundancy pay and notice is reflected in redundancy guidelines of Deutsche Australia published to various employees on 25 May 2001. The announcement stated that the formula for redundancies was as follows:

Redundancy:	1 month per year of service or part year thereof with a minimum of 2 months and uncapped.
Notice:	3 months for Directors and Managing Directors and 1 month for all other staff.

At that stage, the Taxpayer was designated as a "Director".

15. On 12 December 2002, the Taxpayer's solicitors responded to the letter of 9 December 2002. Their letter canvassed various arguments on behalf of the Taxpayer and included the assertion that the Taxpayer did not accept the proposition that a three month period was reasonable and maintained that 18 months was reasonable for the circumstances that had previously been advised.

16. A draft Statement of Claim by the Taxpayer against Deutsche Australia in the Supreme Court of New South Wales was provided to Deutsche Australia's solicitors on a without prejudice basis in February 2003. While that draft was not before the Tribunal, a Statement of Claim that was subsequently filed made a claim for a payment equivalent to 24 months' salary. An inference can therefore be drawn that the draft Statement of Claim made such a demand.

17. In any event, following the provision of the draft Statement of Claim to Deutsche Australia's solicitors, they wrote again to the Taxpayer's solicitors on 26 February 2003, saying that Deutsche Australia proposed to pay the Taxpayer the sums that it believed he was entitled to in connection with the termination of his employment and some additional amounts as a gesture of good faith. After referring to payments that had already been made, the letter said that Deutsche Australia proposed to pay a further net total of $1,052,426.72. That sum included the sum of $497,068.82, which was described as follows:

Termination payment for any other entitlements on termination, including payment in lieu of notice and redundancy.

The letter went on to assert that the payment to the Taxpayer would not include a payment in lieu of 24 months' notice, which was said to be "unreasonable and unjustifiable on any analysis, having regard to [the Taxpayer's] contractual entitlements and circumstances".

18. The Taxpayer's solicitors responded on 2 April 2003 taking issue with a proposal in the letter of 26 February 2003 to deduct tax in respect of certain of the payments. The letter asserted that Deutsche Australia would have no compulsory Australian or Japanese withholding obligations in relation to payments referable to the Taxpayer's Japanese employment, such as the redundancy payment and the Japanese annual leave payments. The letter asserted that such payments were plainly not eligible termination payments within s 27A of the Assessment Act.

19. On 10 April 2002, the Taxpayer's solicitors wrote again to the solicitors for Deutsche Australia, indicating that a point of difference appeared to be withholding tax from the amount referred to as the 14 month termination payment. The letter relevantly said:

Although your client might conceive that our client's redundancy should be 14 months because he is a long standing employee, he will nevertheless be paid solely because his Japanese position, being the relevant employment within paragraph (iii) of the definition [in s 27A] was made redundant by your client. He was a non-resident during the whole time of the relevant employment and the payment will be made only in relation to the redundancy from that employment. His previous employment in Australia, whilst it might operate in the mind of your client in determining the quantum of the payment, is of "historical significance only," and is not a causal factor in the making of the Japanese employment redundancy payment…

20. As I have said, the payments were then made on 1 May 2003 under cover of a letter from Deutsche Australia's solicitors to the Taxpayer's solicitors of that date. The letter enclosed a termination payment schedule showing the calculation of an Australian Related Net Payment of $535,068.03 and a Japan Related Net Payment of $595,040.17.

21. However, the Taxpayer was still not content and, on 30 June 2003, commenced a proceeding against Deutsche Australia in the Supreme Court of New South Wales, claiming damages for wrongful termination of his employment without adequate notice. The proceeding was subsequently settled and on 8 June 2005 a Deed of Release was entered into between the Taxpayer and Deutsche Australia. After reciting, inter alia, the two payments that had already been made on 1 May 2003 by Deutsche Australia and Deutsche Securities, the Deed of Release provided that Deutsche Australia would make a further payment of $700,000 to the Taxpayer as an additional discretionary bonus. In addition, the Deed of Release contained mutual releases of the parties.

22. In the Deed of Release the payment of $535,068.03 was stated to represent a gross amount of $771,529.03 comprising the following:

Repatriation allowance:	$23,875.00
Payment in lieu of untaken Australian annual leave:	$125,307.35
Payment in lieu of untaken Australian long service leave:	$125,277.85
14 months' salary, representing a payment in lieu of notice of 3 months and an additional payment pursuant to Deutsche Australia's redundancy guidelines of 11 months' pay calculated by reference to the Taxpayer's Japanese salary:	$497,068.83.

THE TRIBUNAL'S DECISION

23. The Tribunal relevantly formulated the issues before it as follows:

• • Was the whole of the Redundancy Payment of $497,068.83 an exempt non-resident foreign termination payment?
• • Was part of the Redundancy Payment of $497,068.83 an exempt non-resident foreign termination payment?

24. It was common ground before the Tribunal that those questions involved a determination as to:

• • whether the Taxpayer's employment was service in a foreign country within paragraph (iii) of the definition; and
• • whether the Redundancy Payment related solely to a period of the employment during which the Taxpayer was not a resident of Australia within paragraph (iv) of the definition.

25. It was common ground that the Redundancy Payment was made in consequence of the termination of the Taxpayer's employment and that the payment would be an eligible termination payment, such that paragraphs (i) and (ii) of the definition in s 27A(1) of the Assessment Act were satisfied. The grounds of appeal relate to the application of paragraphs (iii) and (iv).

26. The Tribunal found that the Taxpayer's employment over the last two years had been performed in Japan but that he was still employed by Deutsche Australia throughout that period. The Tribunal considered, therefore, that the character of the Redundancy Payment in the Taxpayer's hands would depend on all the surrounding circumstances.

27. The Tribunal found that the Redundancy Payment compensated the Taxpayer for the termination of his position with Deutsche Australia at least in part. The Tribunal observed that, as set out in the Deed of Release, the calculation of the Redundancy Payment was based on 14 months' salary, being 3 months' salary in lieu of notice and an additional payment in accordance with Deutsche Australia's redundancy guidelines. The Tribunal considered that there was nothing to suggest that the payment was to compensate solely for the period of employment while not a resident of Australia, despite the fact that the Taxpayer was in Japan when he was informed of his redundancy.

28. The Tribunal observed that the Deed of Release was not explicit as to whether the payment was compensation for the loss of the Australian employment or for the loss of the position in Tokyo. However, the Tribunal considered that there was a clear implication that the payment was governed by the employment terms in Australia. Thus, the payment was made by Deutsche Australia, the Australian employer, and it was made in accordance with the guidelines applying to Deutsche Australia employees. The Tribunal considered that the perception that the Redundancy Payment was related principally to the long term Australian employment of the Taxpayer was reinforced by the circumstance that Deutsche Securities made a separate payment to the Taxpayer at the same time. That suggested to the Tribunal that Deutsche Securities paid the Taxpayer what it considered was due to him in accordance with the employment letter whereby Deutsche Securities agreed to pay the Taxpayer his Japanese salary.

29. The Tribunal observed that, had the Redundancy Payment been for employment that was service in a foreign country, that could have been made clear by several methods. Nevertheless, since the Commissioner's objection decision had accepted that the payment was for service in a foreign country, the Tribunal declined to vary the decision in that respect. Thus on one view, the Tribunal appears to have concluded that the employment of the Taxpayer, in consequence of the termination of which the Redundancy Payment was made, was service in a foreign country.

30. However, later in its reasons, the Tribunal cast doubt on that as a finding of fact, saying that it was satisfied that the Taxpayer came within paragraphs (i) and (ii) "and possibly…(iii), but does not satisfy paragraph (iv)…because [the Redundancy Payment] was calculated by taking into account the whole period of his service in and outside Australia".

31. The Tribunal then proceeded to consider whether the Redundancy Payment related solely to a period of the Taxpayer's employment during which he was not a resident of Australia. The Tribunal considered that, having regard to the terms of the Deed of Release, the Taxpayer received the Redundancy Payment at least partly in consequence of the loss of his position with Deutsche Australia. That redundancy also brought the overseas secondment to an end. However, the Tribunal did not consider that that automatically meant that the payment was made for the purpose of compensating the Taxpayer for the loss of the employment in Tokyo.

32. The Tribunal found that the Redundancy Payment compensated the Taxpayer for the loss of his employment at Deutsche Australia, including the loss of his contractual entitlement to resume work with Deutsche Australia in Australia when his secondment to Deutsche Securities ended. The Tribunal concluded, therefore, that the amount of the Redundancy Payment took into account the period of the Taxpayer's service within Australia, in addition to his period of service in Japan, and that it followed that the Redundancy Payment did not satisfy the requirement that it be related solely to a period of the employment during which the Taxpayer was not a resident of Australia.

33. The Tribunal then considered the Taxpayer's contention that the Redundancy Payment should be dissected into components. In that regard, the Tribunal observed that, in his objection to the Commissioner's assessment, the Taxpayer had asserted that the 14 months' salary that made up the Redundancy Payment consisted of:

• (a) three months' salary in lieu of notice;
• (b) two months' salary for being made redundant, attributable to two years employment in Japan;
• (c) nine months' salary for being made redundant, attributable to nine years' employment in Australia.

That was an assertion apparently made by the Taxpayer's accountant.

34. The Tribunal considered that the definition of exempt non-resident foreign termination payment in s 27A required that the relevant payment must relate solely to a period of the employment during which a taxpayer was a non-resident of Australia. The Tribunal considered that it is the characterisation of that whole payment, not its constituent parts, with which the definition is concerned. Accordingly, the Tribunal concluded that, while it may be possible to attribute a portion of the Redundancy Payment to the Taxpayer's service in Tokyo, the whole of the Redundancy Payment nonetheless did not meet the relevant criteria of the definition.

THE PRESENT APPEAL

35. In his Supplementary Notice of Appeal, filed on 29 May 2008, the Taxpayer formulated the following questions of law:

• (a) whether "service in a foreign country" within para (a)(iii) of the definition … means the physical location of the taxpayer's employment or means the physical location of the taxpayer's employer.
• (b) whether the question of whether a payment "related solely to a period of the [taxpayer's] employment during which the taxpayer was not a resident of Australia" within para (a)(iv) of the definition is to be determined by an objective consideration of the facts and circumstances, or whether the subjective beliefs either of the employer or the taxpayer, or the beliefs of each, are determinative or to be taken into account.
• (c) whether, on the facts as found properly by the Tribunal, all of the payment of $497,069 "related solely to a period of the [Taxpayer's] employment during which the taxpayer was not a resident of Australia" within para (a)(iv) of the definition ….
• (d) whether on a proper construction of the definition … a lump sum payment can be dissected into components, such that a part is capable of being "related solely to a period of the [taxpayer's] employment during which the taxpayer was not a resident of Australia" within para (a)(iv) of the definition.

36. Section 44 of the Tribunal Act provides that a party may appeal to the Federal Court, on a question of law, from any decision of the Tribunal. The existence of a question of law is not merely a qualifying condition to ground an appeal from a decision of the Tribunal. Rather, it and it alone, is the subject matter of the appeal and the ambit of the appeal is confined to that question of law:
Brown v The Repatriation Commission (1985) 7 FCR 302. The Commissioner contends that the first three of those purported questions are not questions of law and should be struck out.

37. The thrust of the Taxpayer's contentions, in effect, is that, at the time of the termination of his employment, he was physically located in Tokyo and was not a resident of Australia. He contends that, while the period of reasonable notice may properly be determined by reference to the time of his employment by Deutsche Australia, the relevant fact is that, at the time of termination, he was being remunerated by Deutsche Securities and the Redundancy Payment was made in circumstances where he had asserted, through his solicitors, an entitlement to a payment equivalent to 24 months' salary, and had asserted that any such payment would not be subject to deduction of tax because it was a payment within the definition in s 27A.

38. The grounds of appeal are not easy to comprehend. First, the Taxpayer says that the Tribunal erred in considering that legal employment by Deutsche Australia, an Australian entity, was service not in a foreign country under paragraph (iii). Rather, he says, the Tribunal should have considered the legislative context, which included s 23AG of the Assessment Act, which had the effect that salary paid while not a resident would be exempt. The Taxpayer asserts that, had he been given reasonable notice, the reasonable notice period of 14 months would have been worked out in Japan for which he would have received salary that would have been exempt. However, there was no finding to that effect by the Tribunal. Indeed, the Tribunal was not asked to make such a finding. It is certainly not self-evident that such a finding should or could have been made on the material before the Tribunal. The first ground has no substance.

39. The second ground is that, in so far as the Tribunal inferred from the fact that the Taxpayer's legal employment was with Deutsche Australia, an Australian entity, that there was in fact some service not in a foreign country during the period of the Taxpayer's secondment to Japan, the Tribunal made an error of law. The Taxpayer contended that, while on secondment, his service was service in Japan and he was made redundant from that Japanese position, and that, therefore, the payment was a payment in lieu of notice of termination of his service in Japan.

40. However, that is not the finding made by the Tribunal. The Tribunal clearly found that the payment related not only to the time that the Taxpayer served on secondment in Japan but also to the time of his service in Australia from 1992 until 2000. That was a finding of fact from which there is no appeal under s 44 of the Tribunal Act. In any event, the finding was clearly correct in the light of the exchange of correspondence between the Taxpayer's solicitors and the solicitors for Deutsche Australia.

41. The third ground is that the Tribunal should have characterised the Redundancy Payment solely by reference to that in respect of which it objectively was a payment, that is to say, it was a payment in lieu of reasonable notice of termination of in Japan. As I have said, that is a question of fact and, on the material before the Tribunal, there appears to be no error.

42. The Taxpayer contended that the Tribunal erroneously calculated the Redundancy Payment by reference to how it was calculated by Deutsche Australia. The Taxpayer contends that it is erroneous to characterise a payment by the means by which it is calculated. He contends that it is highly irrelevant that Deutsche Australia called the payment "14 months' salary." What is relevant, he says, is that the payment was in response to his claim for a payment equivalent to 24 months' salary in lieu of 24 months' reasonable notice of termination of his Japanese secondment. He asserts that, since there was no agreement as to the character of the payment made by Deutsche Australia to the Taxpayer, one is left with the objective circumstances. The Taxpayer contends that the Tribunal erred in focusing on the subjective view of Deutsche Australia. He says that that erroneous view is magnified by its observation that the Taxpayer had not presented any corroborative evidence of his own view of how the money should be apportioned.

43. The Taxpayer contends, further, that the Tribunal erred in considering the recitals in the Deed of Settlement as evidencing what one party had stated and done unilaterally some two years previously. He advanced the proposition, which is undeniable, that the conduct of the parties after the event could not, by itself, change the character of the payment. However, that is not what the Tribunal was doing. It was endeavouring to do precisely what the Taxpayer contended, namely, to characterize the redundancy payment by reference to the surrounding circumstances. One relevant factor is that, albeit two years later, the two parties entered into a Deed of Settlement in which they acknowledged the character of the payment. While, as I have said, that acknowledgement cannot change the character, it is of relevance in terms of how the parties considered it at the time when the payment was made.

44. The Taxpayer emphasised that the payment was made only because he had claimed wrongful termination of his Japanese secondment. When made in 2003, the Redundancy Payment was in partial satisfaction of the Taxpayer's claim for payment in lieu of 24 months' notice of termination of his Japanese secondment. Again however, that misstates the circumstances. The clear thrust of the correspondence is that the Taxpayer had been employed by Deutsche Australia for eight or nine years before his secondment to Japan. The payment made on 1 May was paid by reference to 14 months' salary. That payment represented three months' pay in lieu of notice and one month for each year of employment, including Australian employment, in accordance with the guidelines of Deutsche Australia.

45. A fair reading of the Tribunal's reasons indicates that it had regard to the exchanges of correspondence and the assertions made by the Taxpayer's solicitors. It is difficult to see any error on the part of the Tribunal in concluding that the payment related to employment in Australia as well as the period of employment in Japan. The Redundancy Payment was calculated in accordance with the guidelines, which recognised that the period of employment in Australia was relevant. That is precisely the contention that was advanced by the Taxpayer's solicitors prior to the payment. I do not consider that there is any substance in the third ground.

46. The fourth ground advanced by the Taxpayer is that the Tribunal erred in applying a subjective test in having regard to the fact that Deutsche Australia took into account, in deciding what it would pay the Taxpayer, the long term employment of the Taxpayer by Deutsche Australia. For the reasons I have already indicated, I do not consider that that is an accurate characterisation of the approach adopted by the Tribunal. The material before the Tribunal made it patently obvious that the Redundancy Payment related to the Taxpayer's service with Deutsche Australia in Australia as well as his service in Tokyo.

47. I do not consider that there is any error of law on the part of the Tribunal in concluding that the redundancy payment did not relate solely to a period of employment of the Taxpayer during which he was not a resident of Australia. The Tribunal found as a fact, on the material before it, without error, that the Redundancy Payment related both to the period of his employment while a resident of Australia from 1992 to 2000, as well as the period of his employment during which he was resident in Japan.

48. That then raises the second real issue, namely, whether the Tribunal erred in failing to hold that part of the Redundancy Payment related solely to the period of the Taxpayer's employment during which he was resident in Japan. The Commissioner accepts that that raises a question of law but says that there was no error on the part of the Tribunal in the conclusion that it reached.

49. It would be wrong to allow a determination of the character of a receipt in the hands of the recipient to be affected by a consideration of the uncommunicated reasoning that led the payer to agree to make the payment. On the other hand, in a proper case, a single payment or receipt of a mixed nature may be apportioned amongst the several heads to which it relates. Thus, it may be appropriate to follow such a course where the payment or receipt is in settlement of distinct claims of which some at least are liquidated or are otherwise ascertainable by calculation. On the other hand, it will not be appropriate where the payment or receipt is in respect of a claim or claims for unliquidated damages only and is made or accepted under a compromise that treats it as a single undissected amount of damages. In such a case, the amount must be considered as a whole:
McLaurin v Federal Commissioner of Taxation (1961) 104 CLR 381 at 391.

50. The Commissioner accepts that, had there been a basis for apportioning part of the Redundancy Payment, such that it could be said that that part was attributable to the Taxpayer's service in Japan and related solely to the period of his employment in Japan, it may have been possible to dissect the Redundancy Payment. However, no such apportionment was made by the Taxpayer and Deutsche Australia. There was a dissection made, in the correspondence that led to the payment, insofar as a distinction was drawn between redundancy and payment in lieu of notice. However, that distinction was not related to the respective periods of employment in Australia and in Japan. The 11 months' redundancy was calculated by reference to the total period of employment of the Taxpayer by Deutsche Australia from the Taxpayer's commencement in 1992 until his termination in 2002. Similarly, the payment in lieu of notice was not limited to the period of his employment in Japan. The material before the Tribunal indicated that the Taxpayer continued to be employed by Deutsche Australia. Deutsche Australia terminated his employment, albeit at a time when he was serving in Japan and was non-resident.

51. It may have been possible for the Taxpayer and Deutsche Australia to agree on the manner in which the Redundancy Payment was to be apportioned as between service in Japan and service in Australia, such that that part attributable to the service in Japan would not be included in the Taxpayer's assessable income. However, they did not do that. There was no error of law on the part of the Tribunal in concluding that dissection of the Redundancy Payment was not permissible in the circumstances before it.

52. It follows that the Taxpayer's appeal must be dismissed. I understand the parties have agreed that the Commissioner will bear the Taxpayer's costs in any event.