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Edited version of your written advice
Authorisation Number: 1012744797971
Ruling
Subject: Retention benefit
Question
If you repay a pro rata portion of your retention benefit, does the repaid amount form part of your assessable income?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
The scheme commences on:
1 July 2014
Relevant facts and circumstances
You received a retention benefit from your employer in a previous financial year.
You have been advised by your employer that if you resign within a certain period, a pro rata amount of the retention benefit must be repaid.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 59-30(1)
Income Tax Assessment Act 1997 Subsection 59-30(2)
Income Tax Assessment Act 1936 Subsection 170(10AA)
Reasons for decision
Subsection 59-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an amount you receive is not assessable income and is not exempt income for an income year if:
(a) you must repay it; and
(b) you repay it in a later income year; and
(c) you cannot deduct the repayment for any income year.
It is further stated in subsection 59-30(2) of the ITAA 1997 that it does not matter if:
(a) you received the amount as part of a larger amount; or
(b) the obligation to repay existed when you received the amount or it came into existence later.
Subsection 170(10AA) of the Income Tax Assessment Act 1936 permits amendments to notices of assessment in respect of repayments of previously assessable income covered by section 59-30 of the ITAA 1997, despite the usual time limits for an amendment being exceeded.
Therefore there are no time limits for amending an assessment in the situation where a taxpayer has had to repay part of their income and section 59-30 of the ITAA 1997 applies.
In your case, you are about to receive a retention benefit payment. You have been advised that if you resign within the extended service period, you will be required to repay the bonus, on a pro rata basis.
If you repay part of your retention bonus, it will no longer form part of your assessable income. If the repaid amount has been included as income, you are entitled to request an amendment to remove that amount.
Please note that the amount can only be excluded from your assessable income once the amount is actually repaid. You should include a copy of any documents provided by your employer with any amendment request.