Private ruling: Employment Termination Payments
Date of advice: 8 August 2025
Published: 27 October 2025
Ruling period: Year ending 30 June 2025 | Year ending 30 June 2026 | Year ending 30 June 2027 | Year ending 30 June 2028 | Year ending 30 June 2029
Date scheme commenced: 1 July 2024

Ruling: Q1: For the purposes of working out the withholding amount under paragraph 12-85(b) of Schedule 1 to the Taxation Administration Act 1953 (TAA), are the lump sum payments made to staff, who worked for Members of the Legislative Assembly who lost or did not contest an election, employment termination payments? | A1: Yes.

Relevant facts and circumstances: The Office of the Legislative Assembly provides procedural and administrative advice and support to the Assembly and its committees. A primary responsibility of the office is to provide staff to enable the Assembly and committees to operate efficiently. Section 10 of the Australian Capital Territory (Self-Government) Act 1988 , outlines the term of office of Members of the Legislative Assembly: The term of office of a member duly elected begins at the end of the day on which the election of the member is declared and, unless sooner ended by resignation or disqualification, or by dissolution of the Assembly, ends on the polling day for the next general election. The Speaker and Ministers continue to hold office until immediately before a Speaker and a Chief Minister are elected at the first meeting of the Assembly after the general election. Subsection 13 'Termination of employment' of the Legislative Assembly (Members' Staff) Act 1989 ('LAMS Act') states: 1) The employment of a person under this part terminates if the member of the Assembly by whom the person was employed - a) Dies; or b) Ceases to be a member of the Assembly The Legislative Assembly (Member's Staff) Deemed Date of Termination of Employment of Members' Staff Direction 2020 (1) ('the Direction') provides the following: Clause 7 Class of persons to whom this applies This direction applies to the class of persons whose employment ceased, or would have ceased, by the operation of subsection 13(1) of the Act Clause 8 Termination of employment 1) The class of persons to whom this direction applies are deemed to continue in employment until the date of the declaration of the poll or the date that is four weeks after polling day, whichever date is later, where a member- (a) ceases to be a member on the polling day for a general election by virtue of section 10 of the Australian Capital Territory (Self-Government) Act 1988 ; and (b) has nominated for re-election at that general election. 2) The class of persons whom this direction applies are deemed to be on leave without pay until the date of the declaration of the poll, where - (a) their employing member ceases to be a member on polling day for a general election by virtue of section 10 of the Australian Capital Territory (Self-Government) Act 1988 and has not nominated for re-election at that general election; and (b) the person has an entitlement to a termination payment under the applicable enterprise agreement and has elected in writing to defer the payment of their termination payment. Employment arrangement for staff members: Section B 'Working in the ACT Legislative Assembly' of the ACT Legislative Assembly Members' Staff Enterprise Agreement 2023-2026 ('the Agreement') provides the following: B1 Types of Employment B1.1 - A person will be engaged under the LAMS Act in one of the following categories: • B1.1.1 Fixed term temporary employment on a full-time or regular part-time basis, engaged for a specified period of time or for a specified task, or as a trainee or cadet. • B.1.1.2 Casua l employment on an irregular and non-systematic basis. B7 Termination Payment ... B7.2 The following employees are not entitled to a termination payment under subclause B7.1: • B7.2.1 An employee whose employment is terminated by resignation or dismissal for misconduct. • B7.2.2 An employee who has a right of return to secure employment in the public sector. • B7.2.3 An employee who is engaged for a fixed period, to fill a vacancy caused by a staff member being absent on leave. • B7.2.4 An employee who is engaged to undertake a specified project, where the project has been completed. • B7.2.5 A probationary employee. • B7.2.6 A casual employee. • B7.2.7 An employee who is immediately re-employed under the LAMS Act. • B7.3 Where an employee is entitled to be paid redundancy pay under section 119 of the Fair Work Act, any termination payment made under subclause B7.1 will be reduced by an amount equal to that redundancy payment As the fixed term employment contract of each of the staff members ceases once a Member ceases to hold office, pursuant to clause B1.1.1. of the Agreement, staff members are engaged under a new employment arrangement each time the employee works for a different Member or Office Holder, or when the Member is re-elected. Where a staff member is re-employed, the staff member enters a new employment arrangement under the Legislative Assembly (Member's Staff) Member's Hiring Arrangements Approval 2021 (No 1). Where a staff member is immediately re-employed under the LAMS Act, per clause B7.2.7 of the Agreement, the staff member is not entitled to a termination payment. A casual employee is also not entitled to a termination payment. Assumptions We have assumed, for the purposes of this ruling, that the payments will be paid within 12 months of the termination of employment. If the payments are not made within 12 months, they will not be employment termination payments, unless it is determined (by means of a determination under subsection (5) or (7)) that paragraph 82-130(1)(b) of ITAA 1997 does not apply. We have further assumed that: • the dismissed employee is not older than the specified age limits; • the actual amount paid is not greater than the amount that could reasonably be expected had the parties been dealing at arm's length, in the event that the employer and employee are in fact not dealing at arm's length in relation to the dismissal; • there is no arrangement entered into between the employer and employee or the employer and another entity to employ the dismissed employee after the termination; and • the payment is not in lieu of superannuation benefits.

Relevant legislative provisions: Taxation Administration Act 1953 section 12-5 | Taxation Administration Act 1953 section 12-45 of Schedule 1 | Taxation Administration Act 1953 section 12-85 of Schedule 1 | Income Tax Assessment Act 1997 section 995-1 | Income Tax Assessment Act 1997 subsection 82-130(1) | Income Tax Assessment Act 1997 section 82-135 | Income Tax Assessment Act 1997 section 15-70 Summary | The lump sum payments are employment termination payments. | No part of the lump sum payments received by staff constitute a tax-free part of a genuine redundancy payment under section 83-170 of the ITAA 1997. | Detailed reasoning | Section 12-45 of Schedule 1 to the Taxation Administration Act 1953 (TAA) imposes an obligation on the paying entity to withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an office holder. | Section 12-85 of Schedule 1 to the TAA states: | An entity must withhold an amount from any of the following payments it makes to an individual: | (a) a superannuation lump sum; | (b) a payment that isan employment termination payment or would be one except that it is received more than 12 months after termination of employment. | Section 12-5 of Schedule 1 to the TAA provides that if more than one provision requires a payer to withhold, only one amount is to be withheld from the payment. The general rule is that the provision that is the most specific to the circumstances of the payment is to apply. | Employment termination payment | Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states that: | employment termination payment has the meaning given by section 82-130. | Subsection 82-130(1) of the ITAA 1997 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. | Failure to satisfy any of the three conditions will result in the payment not being an employment termination payment. Furthermore, any termination payments received outside of the 12 months will be taxed as ordinary income at marginal tax rates, unless the taxpayer is covered by a determination exempting them from the 12-month rule. | (i) Paid 'in consequence of' the termination of 'employment | The first consideration is whether the payment is made 'in consequence of' the termination of employment. | The phrase 'in consequence of' is not defined in the ITAA 1997. However, the courts have interpreted the phrase in a number of cases. Taking into account the courts' decisions on the meaning of the phrase, the Commissioner's view on the meaning and application of the 'in consequence of' test are set out in Taxation Ruling 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' (TR 2003/13). | Paragraphs 5 and 6 of TR 2003/13 state that: | 5....the Commissioner considers that a payment is received by a taxpayer in consequence of the termination of the employment of the taxpayer 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. | 6. The phrase requires a causal connection between the termination and the payment, although the termination need not be the dominant cause of the payment. The question of whether a payment is received in consequence of the termination of employment will be determined by the relevant facts and circumstances of each case. | Whether a payment is made in consequence of the termination of employment is determined by the relevant facts and circumstances of each case. | In your case: | As stated under clause 8(1) of the Direction: | The class of persons to whom this direction applies are deemed to continue in employment until the date of the declaration of the poll or the date that is four weeks after polling day, whichever date is later, where a member- | (a) ceases to be a member on the polling day for a general election by virtue of section 10 of the Australian Capital Territory (Self-Government) Act 1988 ; and (b) has nominated for re-election at that general election. | In line with the Commissioner's view as per TR 2003/13, it is considered that none of the relevant payments would have been made, without the staff member's employment first having been terminated. | Under subsection 13(1) of the LAMS Act, the staff member's employment automatically ends when the relevant Member ceases to be a Member. The termination of the staff member's employment, as a result of the end of the relevant Member's employment, directly leads to the payment being made. | It is accepted that payments to staff of Members that cease to be Members, whether due to not contesting the relevant election, or not being re-elected, are made in consequence of the termination of employment. Therefore, the first requirement under subparagraph 82-130(1)(a)(i) of the ITAA 1997 has been satisfied. | (ii) The payment is received no later than 12 months after termination | The second condition for the payment to meet the criteria, as an employment termination payment, is stated under paragraph 82-130(1)(b) of the ITAA 1997. The payment must be received within 12 months of the employee's termination of employment, unless they are covered by a determination exempting them from the 12-month rule. | If the termination payments are paid to the staff member within 12 months of termination, the second requirement of paragraph 82-130(1)(b) of the ITAA 1997 will be satisfied, in terms of the payment being an ETP. | In this case, as we are unable to confirm whether that will be the case for each individual payment, we have included this as an assumption. so that the second requirement can be considered to be satisfied. | Note that, as advised above, section 12-85 of Schedule 1 to the TAA requires an entity to withhold a payment from an individual if the payment is an ETP, or would be an ETP, but for the fact that it is received more than 12 months after the termination of employment. | Therefore, while the payment will not be an ETP if it is paid outside of 12 months, tax will have to be withheld regardless. | (iii) Not a payment mentioned in section 82-135 of the ITAA 1997 | Section 82-135 of the ITAA 1997 excludes certain payments from being an employment termination payment, including the tax-free part of a genuine redundancy payment. | Genuine redundancy payment | Section 83-175 of the ITAA 1997 defines what is a genuine redundancy payment. The section identifies: | • the conditions that must be satisfied for at least part of a payment to be treated as a genuine redundancy payment; | • how to work out what amount of the payment is a genuine redundancy payment; and | • what payments are excluded from being a genuine redundancy payment. | A payment made to an employee is a genuine redundancy payment if it satisfies all the conditions set out in section 83-175 of the ITAA 1997. This section states: | (1) A genuine redundancy payment is so much of a payment received by an employee who is dismissed from employment because the employee's position is genuinely redundant as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the dismissal. | (2) A genuine redundancy payment must satisfy the following conditions: | (a) the employee is dismissed before the earlier of the following: | (i) the day the employee reached pension age; | (ii) if the employee's employment would have terminated when he or she reached a particular age or completed a particular period of service the day he or she would reach the age or complete the period of service (as the case may be); | (b) if the dismissal was not at arm's length the payment does not exceed the amount that could reasonably be expected to be made if the dismissal were at arm's length; | (c) at the time of the dismissal, there was no arrangement between the employee and the employer, or between the employer and another person, to employ the employee after dismissal. | (3) However, a genuine redundancy payment does not include any part of a payment that was received by the employee in lieu of superannuation benefits to which the employee may have become entitled at the time the payment was received or at a later time. | As can be seen above, for a payment to be a genuine redundancy payment, subsection 83-175(1) requires: | • The payment to be received by an employee who is dismissed because their position is genuinely redundant ; and | • The payment to exceed the amount that could reasonably be expected to be received by the employee if their employment was terminated voluntarily at that time. | For a genuine redundancy payment to exist, both elements need to be satisfied. | The Commissioner has issued Taxation Ruling TR 2009/2 Income tax: genuine redundancy payments (TR 2009/2), which outlines the requirements to be satisfied before any payment made to a person whose employment is terminated qualifies for treatment as a genuine redundancy payment under section 83-175 of the ITAA 1997. | Paragraph 11 of TR 2009/2 states: | 11. There are four necessary components within this requirement: | • The payment must be received 'in consequence of' an employee's termination. | • That termination must involve an employee being dismissed from employment. | • That dismissal must be caused by the redundancy of the employee's position. | • The redundancy payment must be made genuinely because of a redundancy. | In your case: | Component 1: payment 'in consequence of' termination | As stated above (under 'Employment termination payment'), in line with the Commissioner's view as per TR 2003/13, it is considered that the payments would not be made, without the employment of the relevant staff member being terminated. | Therefore, this condition is met. | Component 2: 'dismissal' from employment | The Commissioner's view is that a genuine redundancy can only arise where there is no suitable job available for the employee with the employer, meaning that he or she must therefore be dismissed. | Dismissal requires a decision to terminate employment at the employer's initiative without the consent of the employee. | Determining whether an employee has consented to their termination requires an assessment of the facts and circumstances of each case. | As per Section 13 of the LAMS Act, staff members hold a contract of employment under the relevant Member until such time as the Member dies or is no longer a Member of the Assembly. The staff member does not consent to the termination of their employment; it is not voluntary. | Therefore, this condition is met. | Component 3: dismissal caused by 'redundancy' | Section 83-175 further requires that the dismissal be caused by redundancy of the employee's position, and not for some other reason. | The reason for a dismissal is to be established in light of the facts and circumstances of each case. | The position of the staff member ceases to exist at the time the relevant Member ceases to hold office, whether that is because they lost the election, or chose not to contest it. | If the Member is re-elected and the staff member is immediately re-employed, the position may not be considered to be redundant. | However, in such a scenario, a payment will not be made, as clause B7.2.7 of the Agreement excludes termination payments from being made in cases of immediate re-employment. | Therefore, this condition is met. | Component 4: 'genuine' redundancy | Contrived cases of redundancy will not meet the conditions in section 83-175. Whether a redundancy is 'genuine' is determined on an objective basis. | The fact that an employer and employee have an understanding that a payment on termination is caused by redundancy or that the employer treats the payment as a redundancy payment for tax purposes does not of itself establish genuine redundancy. | There is no indication that there is a contrived redundancy in this case, or that the potential 'redundancy' is not genuine. | Therefore, this condition is considered to be met. | Further conditions for a genuine redundancy payment | As outlined above, in addition to the basic requirements for a genuine redundancy payment found in subsection 83-175(1), the further conditions for genuine redundancy payment treatment in subsections 83-175(2) and (3) require that: | • the dismissed employee is not older than the specified age limits; | • the termination is not at the end of a fixed period of employment; | • the actual amount paid is not greater than the amount that could reasonably be expected had the parties been dealing at arm's length, in the event that the employer and employee are in fact not dealing at arm's length in relation to the dismissal; | • there is no arrangement entered into between the employer and employee or the employer and another entity to employ the dismissed employee after the termination; and | • the payment is not in lieu of superannuation benefits. | In your case: | As we are ruling on a particular type of payment, rather than an actual payment being made to a particular staff member, we are unable to confirm whether: | • the dismissed employee is not older than the specified age limits; | • the actual amount paid is not greater than the amount that could reasonably be expected had the parties been dealing at arm's length, in the event that the employer and employee are in fact not dealing at arm's length in relation to the dismissal; | • there is no arrangement entered into between the employer and employee or the employer and another entity to employ the dismissed employee after the termination; and | • the payment is not in lieu of superannuation benefits. | As such, we have included the above as assumptions. | Under subparagraph 83-175(2)(a)(ii) of the ITAA 1997, a payment made at the end of a fixed period of employment cannot normally be a genuine redundancy payment. | Where a contract is not renewed at the end of a contractually stipulated term, evidence is required to displace the express terms of the contract and establish an ongoing employment relationship. This is likely to be the exception rather than the rule. | The Agreement and the LAMS Act provide that employment is fixed term and tied to the Member's tenure. Staff members are employed under fixed term temporar y employment, on a full-time or regular part-time basis, to support the Member until the next polling day. Even if the Member is re-elected, a new contract of service is to be issued to staff members. | • Clause B1.1.1defines employment as temporary or task-based, which has a contractual expiry rather than redundancy. | • Clause B7.2.4 excludes redundancy payments for project-based roles or fixed-term roles ending naturally. | As the termination of staff members' employment is at the end of a fixed term of employment, it cannot be a genuine redundancy payment. | Casual employees are not entitled to a termination payment. | The payments made under the LAMS Act do not fall within any of the other exclusions contained in section 82-135 of the ITAA 1997. Accordingly, for the purposes of working out the withholding amount under paragraph 12-85(b) of Schedule 1 of the TAA, the payments made to staff who worked for Members of the Legislative Assembly who lost or did not contest an election, are considered employment termination payments based on the facts supplied for this ruling.