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Ruling

Subject: Genuine redundancy - age limit

Question

Does the payment made as a result of your redundancy qualify as a genuine redundancy where you are over 65 years of age at the time of the termination of employment?

Advice/Answers

No.

This ruling applies for the following period

Year ending 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You commenced employment with your employer in the 2001-02 income year.

In the 2012-13 income year you were advised by your employer of the need for redundancies.

A few employees retained employment, however, all other employees were made redundant.

Your employment was terminated in the 2012-13 income year, after you turned 65 years of age.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 83-175

Income Tax Assessment Act 1997 Paragraph 83-175(2)(a)

Age Discrimination Act 2004 Section 40

Reasons for decision

Summary of decision

The payment you received from your employer will not be a genuine redundancy payment as your employment was terminated after you turned 65 years of age.

Detailed reasoning

A payment made to an employee is a genuine redundancy payment (GRP) if it satisfies all the conditions set out in section 83-175 of the Income Tax Assessment Act 1997 (ITAA 1997).  This section states:

1) A genuine redundancy payment is so much of a payment received by an employee who is dismissed from employment because the employees position is genuinely redundant as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of dismissal.

2) 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 employees 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 arms length the payment does not exceed the amount that could reasonably be expected to be made if the dismissal were at arms 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 dismissal.

3) However, a genuine redundancy payment does not include any part of a payment that was received by the employee in lieu of superannuation benefits to which the employee may have become entitled at the time the payment was received or at a later time.

Payments not covered

4) A payment is not a genuine redundancy payment if it is a payment mentioned in section 82-135 (apart from paragraph 82-135(e)).

Under subparagraph 83-175(2)(a)(i) of the ITAA 1997 your employment must be terminated before you turn 65 years of age. As your employment was terminated on in the 2012-13 income year, after you turned 65 years of age, you do not meet the condition under subsection 83-175(2) of the ITAA 1997.

All conditions set out in section 83-175 of the ITAA 1997 must be met for a payment to be a genuine redundancy payment. As you have not met one of the conditions under section 83-175 of the ITAA 1997, it is not necessary to discuss whether you meet the other conditions under section 83-175 of the ITAA 1997. Therefore, the payment you received from your employer will not be a genuine redundancy payment under section 83-175 of the ITAA 1997.

Please note that there are no age discrimination issues in this case. Section 40 of Division 4 (General Exemptions) of Part 4 (Unlawful Age Discrimination) of the Age Discrimination Act 2004 states:

This part does not make unlawful anything done by a person in direct compliance with a taxation law (within the meaning of the Income Tax Assessment Act 1997).

Further, the Explanatory Memorandum to the Age Discrimination Bill 2003 (which was enacted as the Age Discrimination Act 2004) states in relation to section 40:

Taxation: Distinctions based on age can legitimately feature in a number of ways in taxation legislation including rebates and other concessions. To ensure this flexibility is retained it is appropriate that taxation legislation laws be exempt.