ATO ID 2001/327: Lump sum payment received for removal of motor vehicle from remuneration package
Date of decision: 23 July 2001
Business line: Small Business/Individual Taxpayers

Issue
Is a lump sum payment received by a taxpayer for the removal of a motor vehicle from a remuneration package assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes, a lump sum payment received by a taxpayer for the removal of a motor vehicle from a remuneration package is assessable income under subsection 6-5(1) of the ITAA 1997.

Facts
The taxpayer's employer removed a motor vehicle from the taxpayer's remuneration package. The motor vehicle had been supplied to the taxpayer during previous years as a fringe benefit. After the taxpayer's employment was terminated the taxpayer successfully recovered the fringe benefits tax value of the motor vehicle from the former employer. The taxpayer received the fringe benefits tax value of the motor vehicle as a lump sum payment from which an amount of tax had been withheld under section 12-35 of Schedule 1 of the Taxation Administration Act 1953.

Reasons for decision
Summary: An employee's remuneration package may include salary, wages or fringe benefits provided by the employer. Salary or wages are considered to be income according to ordinary concepts under subsection 6-5(1) of the ITAA 1997 and are therefore assessable income. Income provided in the form of fringe benefits, as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), is not assessable income and is not exempt income under subsection 23L(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Section 11-55 of the ITAA 1997 lists fringe benefits under subsection 23L(1) of the ITAA 1936 as non-assessable non-exempt income. Subsection 6-15(3) of the ITAA 1997 provides that if an amount is non-assessable non-exempt income it is not assessable income. The definition of fringe benefit under subsection 136(1) of the FBTAA specifically excludes a payment of salary or wages. The taxpayer received a lump sum payment representing the fringe benefits tax value of the motor vehicle that was excluded from the remuneration package. As this fringe benefit entitlement was satisfied by the payment of cash, the payment is considered to be salary or wages and is therefore assessable income under subsection 6-5(1) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(1) subsection 6-15(3) section 11-55
Subject references: Income Salary or wage income Salary sacrifice Fringe benefits Car remuneration package FBT salary packaging FBT motor vehicle FBT car