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Edited version of your private ruling
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Ruling
Subject: Repayment of income
Question
If you repay a pro rata portion of your retention benefit, does the repaid amount form part of your assessable income?
Answer
No.
This ruling applies for the following periods
Year ended 30 June 2011
Year ending 30 June 2012
The scheme commences on
1 July 2010
Relevant facts and circumstances
You are an Australian resident for taxation purposes.
You received a retention benefit from your employer in a previous financial year.
You are considering resigning from your employment.
You have been advised by your employer that if you resign within a certain period, a pro rata amount of the retention benefit must be repaid.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 59-30(1)
Income Tax Assessment Act 1997 Subsection 59-30(2)
Income Tax Assessment Act 1936 Subsection 170(10AA)
Reasons for decision
Subsection 59-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an amount you receive is not assessable income and is not exempt income for an income year if:
(a) you must repay it; and
(b) you repay it in a later income year; and
(c) you cannot deduct the repayment for any income year.
It is further stated in subsection 59-30(2) of the ITAA 1997 that it does not matter if:
(a) you received the amount as part of a larger amount; or
(b) the obligation to repay existed when you received the amount or it came into existence later.
Your situation
In your case, you received a retention benefit payment. You have been advised that if you resign within a certain period, you will be required to repay the bonus, on a pro rata basis.
If you repay part of your retention bonus, it will no longer form part of your assessable income. If the repaid amount has been included as income in your tax return, you are entitled to request an amendment to remove that amount.
Please note that the amount can only be excluded from your assessable income once the amount is actually repaid. You should include a copy of any documents provided by your employer with any amendment request.
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