Private ruling: Genuine Redundancy Payment
Date of advice: 10 October 2016
Published: December 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the payment received a genuine redundancy payment? | A1: No

Relevant facts and circumstances: You were employed as a manager by Employer A. You were served with a deed of release stipulating the conditions of your termination. The deed of release provided for a payment to you, subject to various conditions. You signed the deed of release and subsequently received the payment. Your employment ceased on the termination date. Employer A released a statement that you have sought other opportunities for personal reasons.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 83-175(1).

Reasons for decision: Summary: The payment you received as a result of your termination does not qualify to be a genuine redundancy payment; therefore it is a non-genuine redundancy. | Detailed Reasoning - Genuine redundancy payment: A payment made to an employee is a genuine redundancy payment if it satisfies all the criteria set out in subsection 83-175(1) of the Income Tax Assessment Act 1997 (ITAA 1997). Under subsection 83-175(1) of the ITAA 1997 four criteria must be satisfied: • The payment must be received in consequence of a 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. | Detailed Reasoning - Payment must be received in consequence of a termination: As to whether or not a payment is made in consequence of termination, paragraph 13 of Taxation Ruling TR 2009/2 Income tax: genuine redundancy repayments requires consideration be given to the Commissioners view set out in Taxation Ruling TR 2003/13 Income tax: eligible termination payments (ETP): payments made in consequence of the termination of any employment: meaning of the phrase 'in consequence of' . Paragraph 5 of TR 2003/13 considers that a payment is made in respect of 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'. The deed of release, which you have signed and agreed to, provides that you will be paid should you 'return the deed and the letter in the form of schedule 1 duly executed'. The payment was made upon termination and for no other reason. | Detailed Reasoning - Termination must involve an employee being dismissed from employment: The second condition of a genuine redundancy is that the termination be made as a result of dismissal. In considering this, paragraph 18 of TR 2009/2 requires a decision to terminate employment at the employer's initiative without the consent of the employee. Further paragraph 19 stipulates in determining whether an employee has consented to their termination requires an assessment of the facts and circumstances of each case. Paragraph 20 also provides that a dismissal can still occur where the employee has indicated that they would be interested in having their employment terminated. However, this is on the case where the final decision rests solely with the employer. Your employer's statement, states that you have sought other opportunities for personal reasons. The dead of release does not contain information, in the recitals or definition of 'termination', which demonstrates that the dismissal is as a result of the employer's initiative. The deed states that your employment will be terminated however; there is no information as to whether or not the decision to terminate was at your employer's initiative. In your case the deed of release or your employers statement do not provide any support that the termination is as a result of your employers initiative or that the final decision lay solely with your employer. To the contrary, the facts provide that the termination was a result of your own decision founded in personal reasons. Therefore, the termination does not satisfy the 'dismissal from employment' requirement of a genuine redundancy. Subsequently, the payment does not qualify as a genuine redundancy payment under subsection 83-175(1) of the ITAA 1997.