ATO Interpretative Decision
ATO ID 2002/157
Superannuation
Superannuation, retirement & employment termination: Eligible termination payment (ETP): ETP Post June 1983 Taxed Element included in taxable income.FOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the post-June 1983 component of an Eligible Termination Payment (ETP), which has been rebated to ensure a 0% rate of tax, included in the taxable income of the taxpayer in calculating eligibility for the pensioner rebate under section 160AAA of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. The post-June 1983 component of the ETP is included in the taxable income of the taxpayer for the purposes of calculating the taxpayer's eligibility for the pensioner rebate.
Facts
The taxpayer received an ETP which consisted entirely of a post-June 1983 taxed component. The taxpayer received an ETP rebate which ensured that the rate of 0% tax was applied to the component. The component was included in the taxable income of the taxpayer in calculating the eligibility of the taxpayer for the pensioner rebate. Due to the inclusion of the component, the taxpayer's taxable income exceeded the threshold for the pensioner rebate and the taxpayer was not entitled to the rebate.
Reasons for Decision
Subsection 27B(1) of the ITAA 1936 includes in the assessable income of the taxpayer the taxed and untaxed elements of the post-June 1983 component of an ETP made in relation to the taxpayer in the year of income (see also section 10-5 of the Income Tax Assessment Act 1997 (ITAA 1997)).
The taxable income is then calculated according to section 4-15 of the ITAA 1997 as assessable income less deductions. The post-June 1983 component of an ETP is 'eligible assessable income' (EAI) under section 159S of the ITAA 1936. Under section 159SA of the ITAA 1936, a rebate applies to the post-June 1983 component to ensure that a specified maximum rate of tax is applicable to the EAI. In this case as the taxpayer is over 55 years of age the maximum rate specified is 0%. This rebate does not operate to exclude any amount of EAI from the taxable income of the taxpayer.
The pensioner rebate is calculated in accordance with section 160AAA Of the ITAA 1936. Under Regulation 151 of the Income Tax Regulations, the pensioner rebate is calculated by reference to taxable income.
The Administrative Appeals Tribunal confirmed the use of calculations in this way in the case of Henry Thomas Pooley v. Commissioner for Taxation (1998) 38 ATR 1060.
Date of decision: 4 December 1998
Legislative References:
Income Tax Assessment Act 1936
subsection 27B(1)
section 159S
section 159SA
section 160AAA
section 4-15
section 10-5 Income Tax Regulations
Regulation 151
Case References:
Henry Thomas Pooley v. Commissioner for Taxation
(1998) 38 ATR 1060.
Other References:
Previously released as CDS10354
Keywords
Pensioner rebates
Eligible termination payments
ETP post June 1983 component
Social security pensioner rebates
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 4 December 1998 | Original statement |
| 19 June 2009 | Archived |
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