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Edited version of private advice
Authorisation Number: 1051441675973
Date of advice: 17 October 2018
Ruling
Subject: Genuine redundancy
Question
Is the correct tax-free component of the Redundancy Payment received $xx pursuant to section 83-170 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
This ruling applies for the following period:
Income year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
1. The employee started working for the employer in 19XX.
2. The employee was made redundant in 20XX.
3. The employer used a start date of 19XX to adjust for the time that the employee was employed on a part-time basis.
4. The calculation of the redundancy recognised over 15 years of service, however the tax-free portion of the redundancy payment was calculated using only 10 years of service.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 83-170
Reasons for decision
1. The method for determining the tax-free treatment of a genuine redundancy payment is set out in subsection 83-170(3) of the ITAA 1997 which provides the following formula:
Base amount + (Service amount x Years of service)
5. In this case, the tax-free component should be adjusted to reflect the correct number of years of service.