Private ruling: Genuine redundancy
Date of advice: 13 November 2025
Published: 5 January 2026
Ruling period: Income year ending 30 June 20YY
Date scheme commenced: 17 July 20YY

Ruling: Q1: Is any part of the payment made to you on the termination of your employment a tax-free part of a genuine redundancy payment under section 83-170 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: On XXXX 20XX, you commenced employment with the employer. On XXXX 20XX, a letter was sent to the workplace liaison, by your psychologist. That letter referenced the completion of a questionnaire in relation to a workplace injury suffered by you. That letter stated that: • It was likely you would be unfit for duties for an indefinite period • Your symptoms (at that time) precluded you from any work role in any location On XXXX 20XX, a letter was sent to you by the Chief Executive Officer (CEO). This letter referenced an understanding that you had indicated you would consider an offer of 'incentive to retire' from the employer, under section 37 of the Public Service Act 1999 . This letter advised that, if such an offer was accepted no later than XXXXX 20XX, you would be entitled to the following (gross) payments: • Eligible leave entitlements: $XXXXXXX • Payment in lieu of notice (5 weeks): $XXXXXX • One-off gross payment: $XXXXXX On XXXX 20XX, you received an email from a Human Resources manager, which advised that all payments would be treated as employment termination payments (ETP) for tax purposes. On XXXX 20XX, you lodged a request for a ruling regarding the taxation treatment of the payment you were set to receive upon termination of your employment. More specifically, you asked if it was better classified as a genuine redundancy payment and would therefore be inclusive of a tax-free component. In support of your application, you stated that: • there is a long-standing custom and practice within the Australian Public Service (APS), that employees who are unable to continue in their position due to a medical restriction, are deemed to be 'excess to requirements' and to no longer have the skills to perform the role • any redundancy payments received in these cases has previously been treated as genuine • you are aware of cases of this practice having recently taken place in other government departments • the determination by your employer to treat your redundancy as anything but genuine is unfair and unjust, based upon the current standard practice within the APS On XXXX 20XX, your employer paid you an amount of $XXXXXX, with an amount of $XXXXXX tax withheld. This payment was reported as an employment termination payment (ETP).

Relevant legislative provisions: Income Tax Assessment Act 1997 section 82-130 | Income Tax Assessment Act 1997 section 82-135 | Income Tax Assessment Act 1997 section 83-10 | Income Tax Assessment Act 1997 section 83-85 | Income Tax Assessment Act 1997 section 83-170 | Income Tax Assessment Act 1997 section 83-175

Reasons for decision: Summary: The termination of your employment does not constitute a genuine redundancy under section 83-175 of the Income Tax Assessment Act 1997 (ITAA 1997). No part of the payment you received upon the termination of your employment constitutes a tax-free part of a genuine redundancy payment under section 83-170 of the ITAA 1997. | Detailed Reasoning - Genuine redundancy payments: Genuine redundancy payments are tax-free up to a limit worked out under section 83-170 of the ITAA 1997. The matter of what is a genuine redundancy payment is set out in section 83-175. This section outlines: • the conditions that must be satisfied for at least part of the payment to be treated as a genuine redundancy payment; • how to work out what amount of the payment is a genuine redundancy payment; and • the payments that are considered to be 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 the 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. Payments not covered (4) A payment is not a genuine redundancy payment if it is a payment mentioned in section 82-135 (apart from paragraph 82-135(e)). Taxation Ruling TR 2009/2 Income tax: genuine redundancy payments (TR 2009/2) outlines the Commissioner's view of 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 10 of TR 2009/2 states that, under subsection 83-175(1), a genuine redundancy payment is one 'received by an employee who is dismissed from employment because the employee's position is genuinely redundant'. Paragraph 11 of TR 2009/2 states that there are four necessary components within this requirement: • the payment being tested must be received in consequence of an employee's termination • that termination must involve the 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 | Detailed Reasoning - Component 1:payment 'in consequence of' termination: The phrase 'in consequence of' is not defined in the ITAA 1997. 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' sets out the Commissioner's views on when a payment is made 'in consequence of' termination of employment. 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. 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. It is clear that the Payment you received was 'in consequence of' the termination of your employment: • There is a causal connection between the termination and the Payment • But for the termination, you would not have received the Payment • The termination and the Payment are intertwined Component 1 is satisfied - the Payment you received was in consequence of the termination of your employment. Note :Some other payments, such as unused annual leave and unused long service leave, may also be made 'in consequence of' termination. Any such payments that receive a more specific tax treatment are excluded from being genuine redundancy payments under subsection 83-175 (4) of the ITAA 1997. | Detailed Reasoning - Component 2: 'dismissal' from employment: The Commissioner's view is that a genuine redundancy can only arise where there is no suitable position available for the employee with the employer, meaning they must therefore be dismissed. Dismissal is a particular mode of employment termination. It requires a decision to terminate employment at the employer's initiative without the consent of the employee. This stands in contrast to employment that is terminated at the initiative of the employee, for example in the case of resignation. Consent in this context refers to the employee freely choosing to agree to or approve the act or decision to terminate employment in circumstances where the employee has the capacity to make such a choice. Determining whether an employee has consented to their termination requires an assessment of the facts and circumstances of each case. Consent may be either expressly stated by the employee or implied by their behaviour or conduct. Where an employee is given notice from their employer that they will be terminated at a specified time in the future due to genuine redundancy, that employee will be dismissed because of redundancy for the purposes of section 83-175. It is clear from the language used by the CEO in their correspondence to you of XXXX 20XX that the termination of your employment was at the directive of the employer. You were not provided with a choice as to whether you wished to continue your employment. The offer of payment was conditional upon your acceptance by XXXX 20XX, and referenced acceptance deeming you to be 'retired involuntarily' from the APS. Component 2 is satisfied - you were dismissed from employment. | Detailed Reasoning - 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 redundancy of the relevant position must be the prevailing or most influential reason for the dismissal if there is more than one contributing cause. An employee's position is redundant when an employer determines that it is superfluous to the employer's needs and the employer does not want the position to be occupied by anyone. Accordingly, it is fundamentally the employer's decision that a position is redundant. On occasion the decision may be unavoidable due to the circumstances surrounding the employer's operations. In some circumstances, an employer may reallocate the duties and functions attached to a particular position to another position within the employer's organisational structure. In such cases, the former position is redundant. The letter of XXXX 20XX references an understanding that you had indicated you would consider an offer of an 'incentive to retire'. Although the letter does not reference it, this would seem to be related to your workplace injury, and inability to perform further work duties, referenced in the letter of XXXX 20XX. Indeed, you have stated that the end of your employment with your employer was 'triggered' by the report contained within that letter. Regardless of your statements concerning other employees receiving 'genuine' redundancy payments, nothing in the documentation provided suggests that your dismissal was caused by your position becoming redundant. Indeed, the provision of a position description, provided as part of an advertisement for your former position to be filled, is indicative of the contrary - that your position is not redundant. Rather, your former employer requires it to be filled, and the duties associated with it to be performed. Component 3 is not satisfied - your dismissal was not caused by a redundancy. | Detailed Reasoning - 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. In this case, component 3 has not been met - there is no redundancy. As such, there can be no 'genuine' redundancy; a requirement of a genuine redundancy being that there is a redundancy to begin with. | Detailed Reasoning - Further conditions for a genuine redundancy payment: In addition to the basic requirement 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 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 the employee or the employer and another entity to employ the dismissed employee after the termination • the payment is not in lieu of superannuation benefits As the basic requirements for a genuine redundancy payment have not been met, no assessment has been made as to whether the further conditions have been met.