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Edited version of your written advice
Authorisation Number: 1051420896752
Date of advice: 24 August 2018
Ruling
Subject: Eligible termination payments (ETP)
Question
Do Project Incentive Payments (PIP) and Redundancy Payments payable to employees engaged under the Relevant Enterprise Agreement 2012 (“the Agreement”) fall within the definition of Eligible Termination Payment (ETP) under section 82-130 of the Income Tax Assessment Act 1997 (ITAA97)?
Answer
The Project Incentive Payments (PIP) and Redundancy Payments payable to the employees under the Agreement meet the definition of eligible termination payments under section 82-130 of the ITAA 1997.
This is because these payments meet the employment termination payment criteria stated in subsection 82-130(1) of the ITAA 1997 as follows:
● These payments are received by the employees once they have completed the Project and are made in consequence of the employees’ termination of employment. This is due to the employment contract stating that when a Project is completed, the employee’s employment with the Company ceases.
● The payments are assumed to be paid out to the employees within 12 months of when their employment with the Company ceases.
● These payments are not classified as payments which are excluded under section 82-135 of the ITAA 1997.
This ruling applies for the following periods:
Income year ended 30 June 2018
Income year ending 30 June 2019
Income year ending 30 June 2020
The scheme commenced on:
1 July 2017
Relevant facts and circumstances
1. Relevant Group (Australia) Pty Ltd and its subsidiaries and ESS X Pty Ltd (a related entity) engage employees covered by the Relevant Group Enterprise Agreement 2012 (“the Agreement”).
2. The commencement date of this Agreement was DDMMYY. This is because the Agreement was approved by the Fair Work Commission (Commission) on DDMMYY and clause XX states that the Agreement will commence seven days after it is approved by the Commission.
3. You provided us a copy of a standard employment contract of a Relevant employee by email on DDMMYY which provides details about site conditions and salary. In accordance with Schedule A of this contract (“Schedule A”), a Relevant employer company makes project incentive payments and redundancy payments to employees.
4. When the Project is completed, the employee’s employment with the employer company ceases and then the employee is paid the PIP and redundancy amounts accrued to them.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 82-130.
Income Tax Assessment Act 1997 Subsection 82-130(1).
Income Tax Assessment Act 1997 Paragraph 82-130(1)(a).
Income Tax Assessment Act 1997 Paragraph 82-130(1)(b).
Income Tax Assessment Act 1997 Paragraph 82-130(1)(c).