Private ruling: Genuine redundancy
Date of advice: 13 November 2025
Published: 5 January 2026
Ruling period: Income year ended 30 June 20XX
Date scheme commenced: DD MM YYYY

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, during an annual general meeting (AGM), it was resolved that you, as the then-Chief Executive Officer (CEO) be 'appointed as Director under the new provisions for the appointment of an Executive Director...'. On XXXX 20XX, during a board meeting of the directors, it was resolved that: • The current CEO'S contract be rolled over until the XXXX 20XX AGM when the Company will consider proposed changes to the Constitution. • Subject to those proposed changes being agreed, it is the intention of the Board to offer the current CEO a new contract as Executive Director (ED) of at least three year's (sic) duration, with the possibility of extension and negotiation of a new remuneration package. You have stated that the above contract was never provided to you. On XXXX 20XX, you signed a contract, confirming your continuing employment in the position of CEO, effective from XXXX 20XX. This contract made no reference to an ED role, but provided the following: • The position of Chief Executive Officer incorporates the roles of Public Officer and Chief Executive Officer..., is directly accountable to the Board...and is bound by the (employer) Code of Conduct. • You will be employed on a full-time basis and will work the hours necessary to ensure efficient management of the company. • Your accrued, but untaken, personal leave will not be paid out ...on termination of your employment. • The Board may terminate your employment...by giving six months notice to you in writing. • The Board may also terminate your employment in the following circumstances by giving the specified periods of notice: • For serious and willful misconduct - summary dismissal with no notice required • For other breaches of contract - three months • For poor performance as identified in formal performance appraisals - six months On XXXX 20XX, during a Board meeting, you were appointed to three committees. The minutes of the above meeting referred to you as the 'executive director'. On XXXX 20XX, during a Board meeting, it was noted that you would represent the employer on a working party with a government department. On XXXX 20XX, a Deed of Release (the Deed) was presented to you. The following relevant recitals and terms were included in the Deed: Recitals D Without admission, the parties have agreed to settle all matters between them, including all issues arising out of the Employment, Employment Contract and the Termination in accordance with the terms of this deed E The parties have had full opportunity to obtain independent legal advice prior to entering this deed and have expressly agreed to enter into this deed voluntarily. Terms of this deed 2.3 Organisation's obligations Upon the Organisation receiving the deed executed by the Employee, the Organisation will, with no admission as to liability: (a) Within 14 days, pay to the Employee $XXXXXX gross as an ex-gratia payment (inclusive of statutory and contractual entitlements to notice and severance) into the Employee's nominated bank account... Employee's acknowledgement 3.2 (a) The Employee acknowledges that they have entered into this deed voluntarily and have had an opportunity to take legal advice as to its terms and effect. (c) The Employee acknowledges that the Organisation has made no representation or warranties in relation to the Employee's tax liability and the Organisation is not liable for the payment of any amounts in addition to the Settlement Amount...including in respect of any tax assessed as payable by the Employee in relation to the Settlement Amount. The Employee is aware of and understands the consequences of entering into this deed...including that this deed constitutes full and final settlement of all claims which the employee may have had, may now have or may have had at any future time against the Group if the parties had not executed this deed. The Deed states that you were 'most recently employed in the position of Chief Executive Officer and Executive Director'. On XXXX 20XX, your employment was terminated via the Deed, signed by both you and the employer. On XXXX 20XX, the Employer made a payment of $XXXXXX to you. The payment was classified as an employment termination payment (ETP), type X, and PAYG tax of $XXXXXX was withheld. In XXXX 20XX, the Employer advertised for the position of CEO to be filled. On XXXX 20XX, you applied for a private binding ruling, regarding the classification of the payment you received from the employer, seeking confirmation that the payment qualifies as a genuine redundancy payment under section 83-175 of the Income Tax Assessment Act 1997 . In your application, you have stated that: • In mid-20XX, internal concerns were raised, all of which you formally refuted. You have not provided any explanation of what those concerns were. • In XXXX 20XX, redundancy terms were 'offered and agreed'. • You agreed to those terms, and a draft deed of release (the Draft) was presented to you. You have provided an (unsigned) copy of the Draft, dated 'XXXX 20XX', which contains the following references to 'genuine redundancy': Recitals C. As a result of structure changes in the Organisation and following a series of discussions and consultation between the parties (Discussions), the Organisation has confirmed that the role of Chief Executive Officer and Executive Director is no longer required, and the Employee's employment with the Organisation will end on XXXX 20XX (Termination Date) by way of a genuine redundancy (Redundancy). Though the above recital references a Termination Date of XXXX 20XX, the Draft further provided that 'the Organisation may terminate the Employee's employment prior to the Termination Date if, during the Transition Period, a finding of serious misconduct is made against the Employee following a misconduct review...'. In your application, you have further stated that: • After the Draft terms were offered and agreed, you continued working 'at the Board's request to assist with the operational transition'. • Shortly before your termination, the Draft was withdrawn, without notice or explanation. • The CEO role advertised in XXXX 20XX was materially different from your previous CEO and ED position, with governance accountabilities removed, direct responsibility for operations and fundraising included, and strategic redevelopment responsibilities eliminated. • The true cause of your termination was the operational abolition of your role, following the cancellation of a major redevelopment project and broader organisation restructuring.

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 83-17s

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 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 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. 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 of $XXXXXX from the employer on XXXX 20XX. The Payment was an ex-gratia payment that you received upon agreeing to the Deed, via signing, on XXXX 20XX. It is clear that the payment was made to 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 stipulated in the terms of the Deed, and would not have been paid to you but for the termination of your employment. Component 1 is satisfied - the payment you received was in consequence of your termination. 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). | 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 in the Deed that the decision to terminate your employment was made at the employer's initiative. You were not provided with a choice as to whether you wished to continue your employment. You were provided with a Deed that stated that your employment would end on XXXX 20XX, as determined by the employer, subject to your agreement to the terms, via signing. 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. In the Draft, provided to you in XXXX 20XX, reference was made to your employment ending 'by way of a genuine redundancy', as a result of structure changes in the organisation, resulting in the roles of Chief Executive Officer and Executive Director no longer being required. The Draft was never executed, as it was not signed by either you, or the employer. The Deed contained no references to a genuine redundancy, or a redundancy of any kind, nor to the roles performed by you no longer being required. A deed is a legally binding document. By signing the Deed, 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 Deed. The terms and references contained in the Draft are not relevant, as that document was never executed. By signing the Deed, 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. | 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.