ATO Interpretative Decision
ATO ID 2002/137 (Withdrawn)
Superannuation
Superannuation, retirement & employment termination: Eligible termination payment (ETP) and ETP exemptions & exclusionsFOI status: may be released
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This ATO ID 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.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is an eligible termination payment (ETP) income tax exempt for any part of the payment attributable to the number of days the taxpayer worked overseas?
Decision
No. An ETP cannot be apportioned between the periods of foreign and Australian service as an ETP relates only to the termination of employment and does not accrue on a daily basis. Taxation Ruling IT 2168 provides guidance on rules ascertaining the source of an ETP. Generally, an ETP will be assessable to the taxpayer if it is paid from a superannuation fund that is established and controlled in Australia
Facts
The taxpayer worked a number of years overseas. The taxpayer had been working for the employer before going overseas, and the employer terminated the taxpayer's employment sometime after the taxpayer returned to Australia. The taxpayer was a resident and lodged tax returns in Australia whilst overseas. Upon termination the taxpayer received an ETP from the employer.
Reasons for Decision
For the purposes of section 27CD of the Income Tax Assessment Act 1936 (ITAA 1936) the ETP is not an 'exempt non-resident foreign termination payment', as the taxpayer was a resident of Australia for the entire time the taxpayer worked overseas.
The ETP may, however, satisfy the definition of an 'exempt resident foreign termination payment' (section 27CD of the ITAA 1936). If the ETP is an 'exempt resident foreign termination payment (subsection 27A(1) of the ITAA 1936) then it is exempt from income tax under section 27CD of the ITAA 1936. If, however, the ETP is not exempt from income tax under section 27CD, then it forms part of the taxpayer's assessable income. The ETP cannot be exempt from income tax under section 23AG of the ITAA 1936. This is because 'foreign earnings', as defined in subsection 23AG(7) of the ITAA 1936, does not include income assessable under Subdivision AA of Division 2 of the ITAA 1936. ETPs are assessable under that subdivision and therefore are not 'foreign earnings' under section 23AG of the ITAA 1936.
Date of decision: 1 October 1998
Legislative References:
Income Tax Assessment Act 1936
Subdivision AA of Division 2
subsection 27A(1)
section 23AG
subsection 23AG(7)
section 27CD
Related Public Rulings (including Determinations)
IT 2168
Other References:
Previously released as CDS10145
Keywords
Foreign termination payments
Eligible termination payments
ISSN: 1445-2782
| Date: | Version: | |
| 1 October 1998 | Original statement | |
| You are here | 30 April 2010 | Archived |