ATO Interpretative Decision
ATO ID 2001/767 (Withdrawn)
Superannuation
Superannuation, retirement and employment termination - Eligible Termination payment - Compensation for personal injuryFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a portion of the out of court settlement payment for unfair dismissal excluded from being an eligible termination payment (ETP) under paragraph (n) of the definition of an ETP in subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) as consideration for personal injury?
Decision
No part of the settlement payment is excluded from being an ETP under paragraph (n) of the definition of an ETP in subsection 27A(1) of the ITAA 1936 as the taxpayer does not have a personal injury.
Facts
The taxpayer's employment was terminated without prior notice or warning of any kind.
The taxpayer and employer agreed to a settlement and entered into a deed. The deed included a provision describing an amount of the settlement payment as compensation for personal injury sustained by the taxpayer from the stressful work environment and treatment to which the taxpayer was subjected prior to the termination of employment.
The taxpayer consulted a doctor on two occasions with physical symptoms including vomiting, insomnia and frequent occurrence of agitation resulting from the emotional stress of the termination of employment.
The taxpayer subsequently gained new employment.
Reasons for Decision
Paragraph (n) of the definition of an ETP in subsection 27A(1) of the ITAA 36 specifically excludes an amount from being an ETP if it is consideration for personal injury to the taxpayer.
The term personal injury is not defined in the ITAA36. Graham v. Robinson [1992] 1 VR 279, per Smith J at 281:
'In the absence of express authority, I have come to the conclusion that the expression "personal injury" does not extend beyond physical injury and mental illness to include emotional hurt...... It is true that damages are awarded for pain and suffering in the typical personal injury case. They are awarded, however, where pain and suffering flow from and are connected with physical or mental injury and may therefore be said to be damages "in respect of personal injury" '.
In considering the meaning of personal injury for the purpose of paragraph 27A(1)(n) the Administrative Appeals Tribunal (AAT) has cited Graham v. Robinson, in AAT Case 20/97; No 11 722 35 ATR 1114, 97 ATC 258 and McMahon v. Federal Commissioner of Taxation 41 ATR 1056, 99 ATC 2025, and held that personal injury does not extend beyond physical injury or mental illness.
On the evidence presented, the taxpayer does not have a personal injury. Accordingly, no amount of the ETP can be consideration for, or in respect of, a personal injury to the taxpayer. .
Date of decision: 12 July 2001
Legislative References:
Income Tax Assessment Act 1936
subsection 27A(1)
Case References:
Graham v. Robinson
[1992] 1 VR 279
35 ATR 1114
97 ATC 258 McMahon v. Federal Commissioner of Taxation
41 ATR 1056
99 ATC 2025
Keywords
Personal injury awards
Eligible termination payments
Compensation for injury
Compensations for wrongful dismissal
ISSN: 1445-2782
| Date: | Version: | |
| 12 July 2001 | Original statement | |
| You are here | 30 April 2010 | Archived |