Private ruling: Genuine redundancy
Date of advice: 2 June 2026
Published: 17 August 2026
Ruling period: Income year ended 30 June YY
Date scheme commenced: DD MM YY

Ruling: Q1: Were the payments made to you on termination of your employment, the result of a genuine redundancy under Section 83-175 of the Income Tax Assessment Act 1997 (ITAA 1997), and consequently qualify for concessional tax treatment pursuant to Section 83-170 of the ITAA 1997? | A1: No.

Relevant facts and circumstances: On DD MM YY, you commenced employment with the employer. On DD MM YY, you signed an employment contract (the Contract), confirming you had read the terms, and agreed to be bound by its terms and conditions. The Contract provided the following: • Either you or the Company may terminate your Employment by giving three (3) months' written notice • Your redundancy entitlements were to be determined in accordance with the FW Act • This document records the entire agreement between the parties about your Employment. You expressly agree that this contract contains all relevant terms that relate to your contract of Employment with the Company, and that no other terms, warranties, representations, guarantees and conditions shall have any effect', and • The Contract details a remuneration package with a base package of $XXX,XXX per annum (including superannuation) and participation in an incentive scheme. You were seconded to X under a formal secondment agreement dated DD MM YEAR, with a commencement date of DD MM YEAR for an initial period of X months from commencement. The secondment was temporary, external to the employer. For the period of the secondment, the base salary of your remuneration package accepted was $XXX,XXX (exclusive of superannuation) and ongoing participation in an incentive scheme. Your normal hours being 'business hours. Monday to Friday' did not change from the hours stated in your original Contract. The secondment is a result of a joint venture between the employer and the company. As per the secondment letter, you remained an employee of the employer during the secondment. The formal secondment agreement under Termination of Secondment provided the following: • Despite the End Date, your secondment may be terminated earlier pursuant to the arrangement between the employer and the company. • The employer cannot guarantee you reinstatement to a comparable and suitable position in Australia or anywhere else in the world. • For clarity, if your employment with the employer terminates, your secondment will also cease at that time with immediate effect and without any notice to you. On DD MM YY, the employer notified you of an extension to your secondment to DD MM YY. On DD MM YY, the employer notified you that no suitable role was available for you to return to with the employer. Your former role was permanently occupied and unavailable. No suitable alternative existed at your level of seniority or experience. On DD MM YY, your secondment with X concluded. Discussions took place regarding the terms of your separation. On DD MM YY, prior to the expiry of your secondment finish date of DD MM YY, the parties entered into a Confidential Release Agreement (Agreement) and your employment was terminated on DD MM YY. Relevant recitals, terms, warranties and schedules were included in the Agreement. On DD MM YY, you were paid a number of payments, including a total payment classified by the employer on your payslip as "Employment Termination Payment, ETP type O". The payment was comprised of the following two payments: Additional Termination Payment $XXX,XXX.XX Restraint payment $XX,XXX.XX You were aged XX at termination, below pension age and no aspect of the termination related to performance or conduct. On DD MM YY you applied for a private ruling concerning the classification and taxation of the above payments, seeking confirmation that the payment qualifies as a genuine redundancy payment under section 83-175 of the ITA 1997.

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 ITAA 1997. No part of the payment you received upon the termination of your employment constitutes a concessionally taxed 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 defined by 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. | Detailed Reasoning - 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 then 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. You received a payment totalling $XXX,XXX.XX from the Employer in your final payslip. Tax withheld from the ETP was $XXX,XXX.XX. The payment was comprised of two payments: • Additional Termination Payment • Restraint payment It is clear, but for the termination of your employment, you would not have received the payment. Therefore, it is considered that payment was received by you 'in consequence of' the termination of your employment: • There is a causal connection between the termination and the payment • But for the termination of your employment, you would not have received the payment • The termination and the payment are intertwined The amount of the payment was made under the terms of the Agreement. The Agreement would not have been executed, had your employment not been terminated. Component 1 is satisfied- the payment you received was in consequence of your termination. | 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. You were presented with an Agreement specifying that X months from your last day, as determined by the employer, that your employment would terminate on DD MM YEAR. It is evident from the wording of the Agreement that the decision to terminate your employment was initiated by the employer. The Agreement stated that 'The Company considered whether there were any suitable available positions for the Employee, and determined that there were not'. You were not given the option to decide whether to continue your employment. In the internal communication presented in the Agreement, it states that you decided to step down from your employment. You advised that this formed part of mutually agreed messaging for internal and external purposes... and was a communication device adopted for professional and relational reasons. In addition to this apparent inconsistency, no clarifying evidence was provided as to the circumstances around your original position being filled by another employee, and your extended secondment being concluded early. 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. Prior to the expiry of the secondment, the employer notified you that no suitable role was available for you to return to. Your former position had been permanently filled and was no longer available. As the role was already occupied on a permanent basis, it cannot be regarded as redundant. Furthermore, the Agreement contained no references to a genuine redundancy, or a redundancy of any kind, nor to the roles performed by you no longer being required. By signing the Agreement, you confirmed that you understood each of the included terms, and that you obtained, or had the opportunity to obtain, legal advice about the terms and effect of the Agreement. By signing the Agreement, you are legally bound to the terms contained therein. As such, component 3 is not satisfied- your dismissal was not caused by 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. In contrast to there being a contrived case of redundancy, the parties in this case are in dispute as to the recognition of a redundancy. Accordingly, component 4 is not satisfied as no genuine redundancy was recognised. | Summary: As all 4 components are not satisfied, the payment was not a genuine redundancy payment. | Detailed Reasoning - Further conditions for a genuine redundancy payment: • 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 requirement for a genuine redundancy payment have not been met, no assessment has been made as to whether the further conditions have been met.