ATO Interpretative Decision
ATO ID 2007/163 (Withdrawn)
Superannuation
Transitional termination paymentsFOI status: may be released
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This ATO ID is withdrawn from the database as it contains a view in respect of a provision of the Income Tax (Transitional Provisions) Act 1997 that does not apply after the 2011-12 income year. Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of decisions from the 2007-08 income year, up to, and including, the 2011-12 income year.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Are employment termination payments made under a workplace agreement, entered into after 10 May 2006, transitional termination payments, if the terms under which the payments are made are the same as the terms under a workplace agreement in place just before 10 May 2006?
Decision
No. Employment termination payments made under a workplace agreement, entered into after 10 May 2006, are not transitional termination payments, even if the terms under which the payments are made are the same as the terms under a workplace agreement in place just before 10 May 2006.
Facts
An employee is covered by a workplace agreement within the meaning of the Workplace Relations Act 1996.
There was an agreement in place just before 10 May 2006.
However, a new agreement was entered into after 10 May 2006. This new agreement replaced the agreement that was in force just before 10 May 2006.
The agreements are identical in providing for the making of payments in lieu of notice.
Under the new agreement and within 12 months of employment termination, the employee receives a payment in lieu of notice before 1 July 2012.
Reasons for Decision
Under subsection 82-10(1) of the Income Tax (Transitional Provisions) Act 1997 (ITTPA) a life benefit termination payment received on or after 1 July 2007 is a transitional termination payment in the following circumstances:
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- the payment is received by a person because the person is entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law or a workplace agreement within the meaning of the Workplace Relations Act, and
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- the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006.
Under section 82-130 of the Income Tax Assessment Act 1997, a life benefit termination payment is an employment termination payment received by a person in consequence of the termination of that person's employment. The payment normally has to be received within 12 months of the termination.
The payment in lieu of notice received within 12 months of the termination of employment qualifies as an employment termination payment.
Notwithstanding the entitlements are the same under both the agreement in force just before 10 May 2006 and the new agreement entered into after 10 May 2006, the life benefit termination payment was paid under the relevant provisions of the new agreement that was first entered into on or after 10 May 2006.
Hence, as the payment was not made under an agreement in force just before 10 May 2006 it is not a transitional termination payment.
Date of decision: 24 July 2007Year of income: Year ended 30 June 2007
Legislative References:
Income Tax Assessment Act 1997
section 82-130
section 82-10
Keywords
Employment termination
Date reviewed: 14 October 2014
ISSN: 1445-2782
Date: | Version: | |
24 July 2007 | Original statement | |
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