Private ruling: Are payments received for personal leave exempt from income tax
Published: July 2013
Ruling period: 1 July 2012 to 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are the payments you received for personal leave exempt from income tax, where the leave accrued during a period when you were working at X and you took the leave when you returned to Australia to work for the same employer? | A1: No.

Relevant facts and circumstances: You are a resident of Australia for tax purposes. You worked for your Australian employer at X for a continuous period exceeding 6 months. You worked for this employer before and after your period of employment at X. During this period of employment you accrued personal leave. Under the terms and conditions of your employment: · you are entitled to personal leave · personal leave may be granted to you in the following circumstances: o where you are not fit for work due to personal illness, or injury; or o to provide care or support to a member of your immediate family or a member of your household who requires care or support because of: § a personal illness, or injury; or § an unexpected emergency, and · you are not entitled to be paid out for your accumulated unused personal leave when you terminate your employment. You took personal leave after you returned to Australia which included the personal leave accrued during your period of employment at X, and received payments for this leave.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 24G

Reasons for decision: Summary: Income derived from employment at X is exempt from income tax where the duties of the employment are wholly or mainly performed and the Commissioner is satisfied that at the commencement of that employment you intended to remain at X for a continuous period of more than 6 months (section 24G of the Income Tax Assessment Act 1936 (ITAA 1936)). In order to be exempt, the income needs to be derived from your employment at X. It does not matter that the income is received after your employment at X has ended and you have resumed your duties in Australia, as long as the income is derived from your employment at X. The important test is that the income needs to be attributable to the period which you were employed at X. Under the terms and conditions of your employment (both at X and in Australia), you are only entitled to be absent from work, or entitled to receive personal leave payments, where you are unable to work due to: · personal illness or injury, or · to provide care or support to a member of your immediate family or a member of your household who requires care or support because of a personal illness or injury, or an unexpected emergency. Personal leave is a conditional entitlement. You are only entitled to personal leave when your circumstances satisfy the personal leave entitlements provided under the terms and conditions of your employment. Until that time, you have no entitlement, under those provisions, to be absent from work, or to receive personal leave payments. As such, the payments you receive for any personal leave taken after resuming your employment duties in Australia are not derived from your employment at X. The personal leave is taken and paid in accordance with the terms and conditions of your employment in Australia. As the personal leave payments were not derived from your employment at X, they are not exempt from income tax under section 24G of the ITAA 1936.