Edited version of private advice

Authorisation Number: 1052248100801

Date of advice: 6 May 2024

Ruling

Subject: Separation payment and capital

Question

Is the lump sum separation payment your client received a capital payment?

Answer

Yes. Based on the information provided to the commissioner the separation payment you received from your former employer is a capital payment and is not assessable income.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Your client had been employed by employer X.

Your client returned from leave and is a single parent who applied for (after previous delays by the partnership) and was declined partnership admission.

Your client comfortably met all partnership admission metrics for the previous few years (the requirement).

Your client was denied admission with no formal reasons given, with a less credentialed partner admitted at that time.

Your client felt they had been discriminated against based on their single parent marital status.

When your client raised these discriminatory factors and personal bias issues with HR, it was apparent the situation was irreconcilable.

At that time, under great duress, your client engaged lawyers to negotiate an exit strategy and compensation for the stress caused.

The Deed of Release clearly states that the partnership shall pay the sum of $XXX "in full and final settlement of the allegations".

Your client received a separation payment.

The payment was in settlement of discrimination allegations on the grounds of gender/marital status.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5