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Edited version of your private ruling
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Ruling
Subject: PAYG payable on transfer of the car to the employee as part of a redundancy payout
Question 1
How much PAYG is payable on transfer of the car to the employee as part of the redundancy payout?
Answer
30% plus the Medicare levy and the flood levy if applicable.
This ruling applies for the following periods:
1st July 2011 to 30 June 2012
The scheme commences on:
5 January 2012
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
A redundancy payment made to an employee consisted of unused Annual Leave and ownership of Car at no cost.
The break down is as follows:
$p gross for redundancy
$q gross for vacation, less taxes
$r gross for superannuation account.
The Employer paid the leasing company $x and ownership of the car was transferred at no cost to employee as part of the redundancy package.
The Age of employee is xxx years.
Redundancy occurred during the year ended 30 June 2012& transfer of ownership of car will be effective from the date of redundancy.
The amounts of $q gross for vacation, less taxes and $r gross in to his superannuation account are not included under $y gross for redundancy.
If the company had not given the employee the car, the redundancy payment would have increased and the sum of $y + $x would have been paid to the employee, in cash.
The breakdown of the amount $y is calculated as follows:
Base rate per week: $b
Base rate per week and Bonus: $c
Termination weeks agreed in contract: 13 weeks
Additional weeks pay sign separation agreement: 11 weeks
Additional termination pay: $d
Total Termination pay: $e
Redundancy weeks: 4 weeks
Redundancy pay: $f
Total: $y
This was a genuine redundancy and the employee had 2 years and 1 month of service. The salary earned up to the date of the redundancy was $H. The Employer has provided the name and Tax file number of the employee who was the Chief Executive officer of the company.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 83-170
Income Tax Assessment Act 1997 Section 82-160
Income Tax Assessment Act 1997 Section 960-265
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Summary
PAYG payable on your genuine redundancy payment less the tax-free component is at the rate of 30% plus Medicare levy and flood levy if applicable.
Detailed reasoning
The redundancy payment includes the value of the car ($x). Therefore, the redundancy payment is $ x + total amount payable = $y.
PAYG is deducted from the non tax-free component of the redundancy payment.
The tax-free component for the tax year 2011-2012 is $8,435 + ($4,218 x years of service) = $8,435 + (2 x $4,218) = $16,871.31 (section 83-170 of the Income Tax Assessment Act 1997).
Therefore, $ y amount of PAYG is deducted from $z. The amount of PAYG is determined according to one's preservation age and the redundancy cap amount (sections 82-160 and 960-265 of the ITAA 1997).
As the taxpayer is below his preservation age and the taxable component of the redundancy payment of $z, (section 82-160 and 960-265 of the ITAA 1997).the rate of PAYG is 30%. Therefore, the amount of PAYG deductable from the redundancy payment is $z x 30% = $a.
Note: Medicare levy and the flood levy may apply in addition to the 30% PAYG, as the redundancy payment was made during the tax year ended 30 June 2012.