Private ruling: Repayment of income to employer
Date of advice: 6 February 2017
Published: July 2017
Ruling period: Year ended 30 June 201Y
Date scheme commenced: 1 July 201X

Ruling: Q1: If you repay a pro rata portion of your retention benefit, does the repaid amount form part of your assessable income? | A1: No

Relevant facts and circumstances: You are an Australian resident of taxation purposes. You will receive a retention benefit. You are considering resigning from your employer before the end of the extended service period. You have been advised by the employer that the pro rata amount of this benefit must be repaid, that is, five year extended service period - period of years served = repayment sum.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 59-30(1) | Income Tax Assessment Act 1997 Subsection 59-30(2)

Reasons for decision: Summary: Subsection 59-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an amount you receive is not assessable income and is not exempt income for an income year if: (a) you must repay it; and (b) you repay it in a later income year; and (c) you cannot deduct the repayment for any income year. It is further stated in subsection 59-30(2) of the ITAA 1997 that it does not matter if: (a) you received the amount as part of a larger amount; or (b) the obligation to repay existed when you received the amount or it came into existence later. Your situation In your case, you will receive a retention benefit payment in the 201X -1Y financial year. You have been advised that if you resign within the extended service period, you will be required to repay the bonus, on a pro rata basis. If you repay part of your retention bonus, it will no longer form part of your assessable income. If the amount is repaid in the 201X -1Y financial year, you will be credited any overpaid tax amounts in the processing of your 201X - 1Y tax return. If the amount is repaid in a later financial year, you are entitled to request an amendment to remove that amount from your 201X - 1Y income tax return. You will then be credited any overpaid tax amounts in the processing of your amended 201X - 1Y tax return. Please note that the amount can only be excluded from your assessable income once the amount is actually repaid. You should include a copy of any documents provided by your employer with any amendment request.