| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012410107958
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Employment termination payments
Reasons For Decision.
Question
Is a payment in lieu of long service leave received on termination of employment an employment termination payment (ETP) for the purposes of section 82-130 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No
This ruling applies for the following period:
Income year ended 30 June 2012
The scheme commenced on:
During the income year ended 30 June 2012.
Relevant facts and circumstances
During the 2012 income year, after less than ten years service, you resigned from employment with your former employer (the Employer).
As a consequence, the Employer paid you a termination payment which included an amount said to be a 'Termination Payment in lieu of Long Service Leave' (LSLP).
You state that the LSLP was discretionary as, in accordance with the Employer's enterprise agreement (the Enterprise Agreement), you were not entitled to long service at the time of the termination.
The Enterprise Agreement provides that a payment in lieu of long service leave will be paid when the staff member's employment is terminated in certain circumstances, including:
(a) At the initiative of the staff member or the University:
(i) after 10 years' service, including recognised service with another employer; or …
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 82 130
Income Tax Assessment Act 1997 Subsection 82-130(1)
Income Tax Assessment Act 1997 Section 82-135
Income Tax Assessment Act 1997 Subsection 82-135(1)
Income Tax Assessment Act 1997 Section 83-75
Income Tax Assessment Act 1997 Subsection 995-1(1)
Reasons for decision
In accordance with subsection 82-130(1) of the ITAA 1997, a payment is an employment termination payment (ETP) if:
a) it is received by you in consequence of the termination of your employment no later than 12 months after the termination (although the 12 month restriction does not apply in certain circumstances); and
b) it is not a payment mentioned in section 82-135 of the ITAA 1997.
Subsection 82-135(1) of the ITAA 1997 list the payments that are not ETPs and at paragraph (d) includes 'unused long service leave payments'.
By virtue of subsection 995-1(1) of the ITAA 1997, 'unused long service leave payments' are defined in section 83-75 of the ITAA 1997 which provides that a payment that you receive in consequence of the termination of your employment is an unused long service leave payment if:
a) it is for long service leave you have not used; or
b) it is for long service leave to which you were not entitled just before the employment termination, but that would have been made available to you at a later time if it were not for the employment termination.
Based on the above, although you may not have been entitled to long service leave payment at the time of termination of employment, you would have been entitled to it after 10 years' service (including recognised service with another employer) if you had not resigned from your employment with the Employer. Therefore, payment received on termination of employment in lieu of unused long service leave is not an ETP for the purposes of section 82-130 of the ITAA 1997.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
