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Edited version of your written advice
Authorisation Number: 1051284517292
Date of advice: 21 September 2017
Ruling
Subject: Genuine redundancy payment
Question 1
Do you qualify for a genuine redundancy, and the associated tax free threshold, if you accept a voluntary redundancy from your employer at the age of 64, prior to turning 65 years of age?
Answer
Yes.
This ruling applies for the following periods:
Income year ended 30 June 201X
The scheme commences on:
1 July 201Y
Relevant facts and circumstances
You advise that the redundancy being offered by your employer meets all the criteria for a genuine redundancy due to an amalgamation that occurred on a date in early-201X. The amalgamation abolished your position due to the development and implementation of a new corporate structure in mid-201Y. This resulted in no equivalent salaried position being available or offered to you.
You are guaranteed a job until early-201A however you can apply for a voluntary redundancy prior to this and you intend on applying with your end date being before your 65th birthday.
Your Pay Office has advised you that you personally do not qualify for a genuine redundancy and resulting tax free threshold as you turn 65 years of age during the 201Y-1X income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 83-175
Reasons for decision
Genuine redundancy payments
In accordance with subsection 83-175(1) of the ITAA 1997, a genuine redundancy payment is so much of a payment that:
● is received by an employee who is dismissed from employment because the employee’s position is genuinely redundant; and
● exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of their employment at the time of the dismissal.
Subsection 83-175(2) further states that a genuine redundancy payment must satisfy the following conditions:
(a) the employee is dismissed before the earlier of the following:
(i) the day he or she turned 65;
(ii) if the employee's employment would have terminated when he or she reached a particular age or completed a particular period of service - the day he or she would reach the age or complete the period of service (as the case may be);
(b) if the dismissal was not at *arm's length - the payment does not exceed the amount that could reasonably be expected to be made if the dismissal were at arm's length;
(c) at the time of the dismissal, there was no *arrangement between the employee and the employer, or between the employer and another person, to employ the employee after the dismissal.
Furthermore, the Commissioner’s view, as stated in paragraphs 281 to 283 of Taxation Ruling TR 2009/2 Income tax: genuine redundancy payments (TR 2009/2) is that:
Further conditions for a genuine redundancy payment
281. Before a payment that meets the basic redundancy requirement in subsection 83-175(1) qualifies as a genuine redundancy payment, all other conditions in section 83-175 must be met. These conditions are:
● the dismissal must be made before the person turns 65 or an earlier mandatory age of retirement - paragraph 83-175(2)(a);
● the payment must be made before the end of a fixed period of employment - subparagraph 83-175(2)(a)(ii);
● the payment must not exceed an arm's length amount in the event that the employer and employee are not dealing at arm's length - paragraph 83-175(2)(b);
● there must be no stipulated arrangement to employ the person after the termination - paragraph 83-175(2)(c); and
● the payment must not be in lieu of superannuation benefits - subsection 83-175(3).
Age-based limits
282. An employee receiving a genuine redundancy payment must, at the time of dismissal, be aged less than 65 or less than a younger age of compulsory retirement for the particular position in question. For example, if an employee in a particular position is required to retire at age 60, then the person can only receive a genuine redundancy payment if he or she is less than 60 years old when the dismissal occurs.
283. A termination payment made to a person who has reached age 65 or another age of compulsory retirement at the time of dismissal would be an employment termination payment if the conditions in section 82-130 are satisfied.
Therefore, as long as the date of your redundancy is prior to your 65th birthday, you will qualify for a genuine redundancy and the tax free threshold.
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