Edited version of your written advice

Authorisation Number: 1051194729073

Date of advice: 22 February 2017

Ruling

Subject: Employment termination payments

Question

Is any portion of the payment you received from your former employer (the Employer) in the 20CC-DD income year an invalidity segment of an employment termination payment, in accordance with section 82-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No

This ruling applies for the following period

Income year ended 30 June 2015

The scheme commenced on

1 July 2014

Relevant facts and circumstances

You commenced employment with the Employer during the 200A-0B income year.

While employed by the Employer, you sustained a medical condition diagnosed as work related condition.

During the 20CC-DD income year the Employer advised you that your employment is to be terminated because they required a 'new wave of people'.

Your employment with the Employer ceased during the 20CC-DD income year.

In the 20CC-DD income year, the Employer paid you a termination payment.

Your position with the employer has been filled by another person.

Following the termination of your employment with the Employer, you lodged a workers compensation claim (WorkCover Claim) in respect of the injury sustained in your employment with the Employer

The WorkCover Claim was subsequently rejected.

On a review of the WorkCover Claim, it was decided, in part, that:

● you sustained a personal injury that being a medical condition diagnosed as work related condition;

● this injury arose out of, or in the course of your employment with the Employer; and

● your employment was the major significant contributing factor to your injury.

You state that you have been unfit for work since your employment with the Employer was terminated.

You have provided a copy of two medical certificates.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 82-150

Income Tax Assessment Act 1997 Subsection 82-150(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Summary

The payment you received from the Employer on the termination of your employment with the Employer does not include an invalidity segment as defined in section 82-150 of the ITAA 1997.

Detailed reasoning

Invalidity segment

Subsection 82-150(1) of the ITAA 1997 states that:

An employment termination payment includes an invalidity segment if:

(a) the payment was made to a person because he or she stops being *gainfully employed; and

(b) the person stopped being gainfully employed because he or she suffered from ill-health (whether physical or mental); and

(c) the gainful employment stopped before the person's last *retirement day; and

(d) 2 legally qualified medical practitioners have certified that, because of the ill-health, it is unlikely that the person can ever be gainfully employed in capacity for which he or she is reasonably qualified because of education, experience or training.

*To find definitions of asterisked terms, see the Dictionary, starting at section 995-1.

Section 995-1 of the ITAA 1997 defines 'gainfully employed' as follows:

gainfully employed means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.

In your case, the payment was made to you by the Employer because you stopped being gainfully employed by the Employer.

However, while we acknowledge that you had sustained a work related injury while employed by the Employer, there is no evidence that your employment was terminated because of your injury. Rather, your employment with the Employer was said to have terminated because the Employer wanted to renew their workforce.

The wording of subsection 82-150(1) of the ITAA 1997 has a cumulative effect, that is, all the conditions in that subsection are joined and must be read together. Therefore, a payment will include an invalidity segment only if all the conditions in subsection 82-150(1) are met.

As all conditions of subsection 82-150(1) of the ITAA 1997 are not met in this case, the payment you received from the Employer on the termination of your employment with the Employer does not include an invalidity component as defined in section 82-150 of the ITAA 1997.