Private ruling: Genuine redundancy
Date of advice: 17 October 2018
Published: October 2019
Ruling period: Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the correct tax-free component of the Redundancy Payment received $xx pursuant to section 83-170 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: 1. The employee started working for the employer in 19XX. 2. The employee was made redundant in 20XX. 3. The employer used a start date of 19XX to adjust for the time that the employee was employed on a part-time basis. 4. The calculation of the redundancy recognised over 15 years of service, however the tax-free portion of the redundancy payment was calculated using only 10 years of service.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 83-170

Reasons for decision: Summary: 1. The method for determining the tax-free treatment of a genuine redundancy payment is set out in subsection 83-170(3) of the ITAA 1997 which provides the following formula: Base amount + (Service amount x Years of service) 5. In this case, the tax-free component should be adjusted to reflect the correct number of years of service.