Private ruling: Employment Termination Payment
Date of advice: 4 December 2025
Published: 27 January 2026
Ruling period: Year ended 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Is the payment made to the taxpayer by the employer an employment termination payment (ETP) under section 82-130 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes .


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)(b) | Income Tax Assessment Act 1997 section 82-135 | Income Tax Assessment Act 1997 section 118-20 | Income Tax Assessment Act 1997 section 118-22 | Income Tax Assessment Act 1997 section 118-37 | Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(i) | Income Tax Assessment Act 1997 subsection 995-1(1) ATO view documents | Taxation Ruling TR 2003/13 Income tax: employment termination payments (ETP): payments made in consequence of the termination of any employment: meaning of the phrase 'in consequence of' | Income Tax Employment Termination Payments (12-month rule) Determination 2018

Reasons for decision: Summary: The payment received by the taxpayer is an ETP under section 82-130 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: By virtue of subsection 995-1(1) of ITAA 1997, employment termination payments are defined in subsection 82-130(1) of the ITAA 1997, which states that a payment is an employment termination payment if: (a) it is received by you: (i) in consequence of the termination of your employment; or (ii) after another person's death, in consequence of the termination of the other person's employment; and (b) it is received no later than 12 months after that termination (but see subsection (4)); and (c) it is not a payment mentioned in section 82-135. To determine if a payment is an employment termination payment (ETP), all the conditions in subsection 82-130(1) of the ITAA 1997 must be satisfied. | Detailed Reasoning - Paid as 'in consequence of' the termination of employment: Taxation Ruling IT 2003/ 13 Income tax: employment termination payments (ETP): payments made in consequence of the termination of any employment: meaning of the phrase 'in consequence of' explains that the Commissioner considers that a payment is received by a taxpayer in consequence of the termination of the taxpayer's employment if the payment 'follows as an effect or result of' the termination. In other words, but for the termination of employment, the payment would not have been received by the taxpayer. It is clear that, but for the termination of employment, the payment would not have been made. Following the termination of employment, the application was made. The Settlement Agreement was entered into as a consequence of the application being made. The payment followed 'as an effect or result of' the termination of employment. This requirement is satisfied. | Detailed Reasoning - Payment received no later than 12 months after termination: To receive concessional tax treatment, an ETP must generally be paid within 12 months of termination. Paragraph 82-130(1)(b) says that a payment is an ETP if it is received no later than 12 months after the termination of employment. The taxpayer's employment was terminated on XX/XX/2023. The payment was made on XX/XX/ 2024, which is more than 12 months after the termination. However, paragraph 82-130(4) of the ITAA 1997 says that paragraph 1(b) does not apply to you if: (a) you are covered by a determination under subsection (5) or (7); or (b) the payment is a *genuine redundancy payment or an *early termination payment Subsection 82-130(7) of the ITAA 1997 states: The Commissioner may, by legislative instrument, determine that paragraph (1)(b) does not apply to either or both of the following, as specified in the determination: (a) a class of payments; (b) a class of recipients of payments. Income Tax Employment Termination Payments (12-month rule) Determination 2018 (ETP 2018/1) has been made under subsection 82-130(7). This determination applies to a payment that, other than being received more than 12 months after the termination of an employment, meets the requirements of being an ETP. Such payments are known as late termination payments. ETP 2018/1 states that paragraph 82-130(1)(b) does not apply to a late termination payment if that payment is received more than 12 months after the termination of a person's employment because: (a) legal action commenced within 12 months of the termination of employment, of which the subject is either or both: (i) the person's entitlement to the payment; (ii) the amount of the person's entitlement;... The taxpayer made the application on XX/XX/2023 2023, which is within 12 months of the termination of employment on XX/XX/2023. It is considered that the application constitutes legal action relating to the taxpayer's entitlement to the payment. As such, paragraph 82-130(1)(b) does not apply to the taxpayer, in terms of whether the payment constitutes an ETP. | Detailed Reasoning - Payment is not a payment mentioned under section 82-135 of the ITAA 1997: Section 82-135 of the ITAA 1997 lists specific payments that are excluded from being an ETP. There is no mention of 'general damages' in section 82-135. As 'general damages' is not mentioned in section 82-135, the payment is not a payment mentioned in 82-135. This requirement is satisfied. | Detailed Reasoning - Conclusion: We consider that the payment meets all the requirements to be an ETP under subsection 82-130(1) of the ITAA 1997. The payment is an ETP. | Detailed Reasoning - Further Information: A capital gain you make from a CGT event is disregarded if it is compensation or damages for any wrong or injury you suffer in your occupation, pursuant to subparagraph 118-37(1)(a)(i) of the ITAA 1997. Section 118-20 of the ITAA 1997 also recognises that a capital gain you make from a CGT event is reduced if, because of the event, a provision of the ITAA 1997 includes an amount in your assessable income for any income year. Section 118-22 of the ITAA 1997 treats an ETP that you receive as being included in your assessable income. As such, any capital gain you made will be reduced to zero. As any capital gain you made will be reduced to zero, under the anti-overlap provisions, it is not necessary to consider the exemption in section 118-37 of the ITAA 1997.

The taxpayer was employed by the employer from XX/XX/2019 to XX/XX/2023. | On XX/XX/2023, the taxpayer lodged an 'Application for Order in the Human Rights List' with the XXXXXXXXX Tribunal. The application was for an order under the Equal Opportunity Act 2010 or the Racial and Religious Tolerance Act 2001. The application was in relation to discrimination and sexual harassment and stated the following: | § The Taxpayer was subjected to sexual harassment by employees of the Employer, on more than one occasion. | § The Taxpayer was subjected to discrimination by both employees and management of the employer, based on his disability. | § Following the incidents of sexual harassment, the taxpayer was diagnosed with XXXXXX, and deemed to be incapable of employment for a period of time. | § The taxpayer was required to attend disciplinary meetings on XX/XX/2023 and XX/XX/2023, under the threat of termination of his employment. | § On XX/XX/2023, the taxpayer attended a disciplinary meeting, at which he verbally resigned from his employment due to sexual harassment and discriminatory conduct. | § In consequence of the sexual harassment and discrimination, the taxpayer suffered loss and damage, being past and future economic loss, pain, suffering, hurt, distress and humiliation. | Following the lodging of the application, the taxpayer and the employer agreed to settle the matter, by the signing of a Settlement Agreement. | A copy of the Settlement Agreement, signed by a representative of the employer on XX/XX/2024, but unsigned by the Taxpayer, has been provided with the application for private ruling, received by the Australian Tax Office on XX/XX/2025. | Under the 'Terms of Settlement', the employer agreed to make a payment of $XX,XXX to the taxpayer, as 'general damages'. The agreement does not refer to 'loss and damage', 'pain', 'suffering', 'hurt', 'distress', or 'humiliation'. | Relevantly, the agreement states: | Without any admission of liability other than as set out in this Agreement, the Employee and the Company agree to settle all claims and disputes arising out of, or in connection with the Resignation, the Proceeding and the Employment on the terms set out in this Agreement. | On XX/XX/2024, the payment of $XX,XXX was made to the taxpayer, with tax of $XX,XXX withheld. | On XX/XX/2025, the Taxpayer lodged his tax return for the 2024 financial year, including the payment as an ETP. | Contentions: The taxpayer contends that: | § The payment does not constitute an ETP. | § The payment should be treated as an excluded payment for tax purposes. | § As personal damages, the payment is excluded for the purposes of capital gains tax (CGT). | Reasons for decision: These reasons for decision accompany the Notice of private ruling for XXXXXX. | This is to explain how we reached our decision. This is not part of the private ruling.