Private ruling: Subject Transitional termination payment, directed termination payment and other matters
Published: June 2012
Ruling period: Income year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the whole amount of a payment to be made to a taxpayer in respect of the termination of the taxpayer's employment, under a deed of settlement and release, an employment termination payment that does not include an amount for restraint of trade? | A1: Yes | Q2: Is a life benefit termination payment to be made to a taxpayer on termination of the taxpayer's employment a transitional termination payment pursuant to section 82-10 of the Income Tax (Transitional) Provisions Act 1997 ? | A2: Yes | Q3: If a taxpayer directs the taxpayer's employer to use all or part of a transitional termination payment to make a directed termination payment to a complying superannuation fund, may the payment consist of the entire amounts of the taxable and tax free components of the transitional termination payment? | A3: Yes | Q4: Is the taxable component of a directed termination payment made in respect of a taxpayer included in the taxpayer's concessional contributions? | A4: No, given the specified circumstances of the taxpayer. | Q5: Is the tax free component of a directed termination payment made in respect of a taxpayer included in the taxpayer's concessional and/or non-concessional contributions? | A5: No | Q6: Is a directed termination payment made to a complying superannuation fund non-arm's length income of the fund under subsection 295-550(1) of the ITAA 1997? | A6: No, given the specified circumstances of the taxpayer.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The Taxpayer started working for the Employer in the early 1970's, first as the personal aide of the founder and owner of the Employer's business, and later as: · Chief Executive Officer (CEO) of the Employer; · Group Executive Director of the Employer and · a Director of certain companies within the Employer's group of companies. The Employer currently operates at a number of locations and employs over 1,000 employees. The Taxpayer has never been a shareholder of the Employer and/or any company within the Employer's group of companies. In the second quarter of the income year, the Taxpayer tendered notice of resignation to the Employer. In the third quarter of the same income year, the Taxpayer withdrew the notice. The withdrawal was accepted by the Employer. In the first quarter of the income year, the Taxpayer eventually retired from the employment permanently, and resigned from all directorships of companies within the Employer's group of companies. No interruption occurred throughout the entire period of the Taxpayer's employment. Until the early 2000's there was no written contract of employment. The Taxpayer and the Employer then entered into a contract of employment (the Employment Contract) which continued annually, unless terminated or reviewed. Among other things the Employment Contract provided that: · the Taxpayer's remuneration would be for a specified amount a year; · the Taxpayer would not, for a period of six months after termination of employment, perform services for any organisation within the same industry as the Employer for any reason, on the Taxpayer's own account or for any other person, firm, company or business; · the Taxpayer acknowledged that the 'restraint in trade' provision in the Employment Contract was reasonable, particularly given the provision on termination payment; · the Taxpayer or the Employer could terminate the Taxpayer's employment on three months' notice or by payment in lieu of notice; · on termination of employment by the Employer or upon resignation of employment by the Taxpayer, the Employer would, in addition to any other amount that might be due, pay the Taxpayer a payment equivalent to a specified multiple of the Taxpayer's annual remuneration as specified in the Employment Contract or as varied subsequently; · the payment referred to in (e) above would not be made by the Employer to the Taxpayer if the termination was for conduct warranting summary dismissal; and · the contract commenced on the date it was signed by the Taxpayer. In addition to the annual remuneration, the Taxpayer also received, for a number of years since the early 2000's, a discretionary distribution of a certain amount each year from the family trust of the founder and owner of the Employer's business pursuant to a letter of wishes left by the founder and owner, who died The distribution was made to a corporate entity of which the Taxpayer and a relative of the Taxpayer were equal shareholders. In the second half of the 2000's the Taxpayer expressed the desire that the annual remuneration agreed be increased in substitution for the discretionary distribution, otherwise the Taxpayer would seriously consider resigning. The Employer agreed, in its board meeting, to increase the annual remuneration of the Taxpayer to a specified amount per year. When the Taxpayer's remuneration was raised in the board meeting, the Taxpayer did not take any part in the discussion The increased amount had remained unchanged till the Taxpayer retired in the first quarter of the income year. According to an external entity providing advice on executive remuneration and incentives, the Taxpayer's remuneration package after the increase was considered a "market amount", and the "retirement allowance" of as a specified multiple of the annual remuneration was also considered reasonable. Upon termination of the employment of the Taxpayer in the first quarter of the 2011-2012 income year, the Employer initially disputed the Taxpayer's entitlement to an employment termination payment and the quantum thereof. The Employer raised various matters which, in the Taxpayer's view, were designed to persuade the Taxpayer to accept a lesser amount than what the Taxpayer was entitled to under the Employment Contract. These matters were vigorously denied by the Taxpayer as unfounded. In addition, the Employer also claimed that its cashflow prevented it from making the payment. The dispute between the Employer and the Taxpayer was resolved under a Deed of Settlement and Release (the Deed) executed by both the Employer and the Taxpayer. The following was provided in the Deed: The Employee has received a portion of long service leave entitlement upon termination of employment. Certain disputes have arisen between the Employer and the Employee as to: the entitlement of the Employee to the payment of a termination payment; claims which the Employer has alleged it has against the Employee and which the Employee has denied exist. The parties have entered into this Deed to settle all matters between the parties arising out of the Employee's Employment and the entitlements of the Employee as a consequence of the termination of the Employee's Employment. Without admission of liability the Employer agrees to pay to the Employee the long service leave entitlement balance and the agreed amount of termination payment. The Employee may request the Employer to issue a pre-payment statement in respect of the termination payment, and the Employer must issue the pre-payment statement requested. The Employee may provide to the Employer payment instructions in respect of the termination payment. Payment instructions may relate to the specific order in which payments are to be made where the instruction require the termination payment to be partly a directed termination payment and partly cash. The Employee releases and discharges the Employer from all liability for damages or losses and from all sums of money which the Employee has or had or at any time in the future may have or have had against the Employer for or by reason or in respect of any act arising out of or in connection with or incidental to the Employee's employment, any employment entitlements and any payment required to be made or alleged by the Employee to be required to be made pursuant to the Employment Contract. The Employer releases and discharges the Employee from all liability for damages or loss and from all sums of money which the Employer has or had or at any time in the future may have or have had against the Employee for or by reason of or in respect of any act arising out of or in connection with or incidental to the Employee's employment. The agreed amount of termination payment relates exclusively to the Employment Contract, although pursuant to the Employment Contract the amount should have been greater (based on the specified multiple of times of the Taxpayer's annual remuneration) had the Employer not disputed the Taxpayer's entitlement and the quantum thereof. In view of the Employer's assertion that it was in cashflow difficulties and being desirous to "move on" instead of negotiating endlessly or resorting to litigation, the Taxpayer made a commercial decision to settle by accepting: · the long service leave balance; and · the agreed amount of termination payment, which is less than what the Taxpayer was entitled to under the Employment Contract · after various offers and counter-offers had been made to/from the parties in dispute. It has been confirmed that it is not the intention of both the Employer and the Taxpayer to treat any part of the termination payment as a consideration given by the Employer in return for the Taxpayer undertaking a restraint of trade after the termination of the Taxpayer's employment. The termination payment comprises: · a tax-free component; and · a taxable component. The Taxpayer intends to instruct the Employer to pay the taxable component of the termination payment to a complying superannuation fund (the Fund) as a directed termination payment and to receive the tax-free component of the termination payment in cash. The Taxpayer has not received any previous transitional termination payment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 82-130(1). | Income Tax Assessment Act 1997 Subsection 82-130(2) | Income Tax Assessment Act 1997 Section 82-135 | Income Tax Assessment Act 1997 Paragraph 82-135(j) | Income Tax Assessment Act 1997 Section 295-190 | Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax (Transitional Provisions) Act 1997 Subsection 82-10(1) | Income Tax (Transitional Provisions) Act 1997 Subsection 82-10(2) | Income Tax (Transitional Provisions) Act 1997 Subsection 82-10(3) | Income Tax (Transitional Provisions) Act 1997 Subsection 82-10(4) | Income Tax (Transitional Provisions) Act 1997 Subsection 82-10(6) | Income Tax (Transitional Provisions) Act 1997 Section 82-10A | Income Tax (Transitional Provisions) Act 1997 Section 82-10D | Income Tax (Transitional Provisions) Act 1997 Section 82-10E | Income Tax (Transitional Provisions) Act 1997 Section 82-10F | Income Tax (Transitional Provisions) Act 1997 Section 82-10G | Income Tax (Transitional Provisions) Act 1997 Section 292-25 | Income Tax (Transitional Provisions) Act 1997 Section 292-90

Reasons for decision: Detailed Reasoning - Summary of decision: The entire amount of the payment to be made by the Employer in respect of the termination of the Taxpayer's employment is an employment termination payment. No part of it should be treated as a capital payment for, or in respect of, a legally enforceable contract in restraint of trade. The employment termination payment is a transitional termination payment (TTP). The directed termination payment (DTP) to be made to the Fund by the Employer on behalf of the Taxpayer may comprise a taxable component of any amount and/or a tax free component of any amount as the Taxpayer may choose. No part of the taxable component of the DTP to be made to the Fund by the Employer on behalf of the Taxpayer is included in the Taxpayer's concessional contributions for the 2011-12 financial year. If a tax free component is included in the DTP to be made to the Fund by the Employer on behalf of the Taxpayer, no part of that tax free component is included in the Taxpayer's concessional contributions or non-concessional contributions for the 2011-12 financial year. The DTP to be made to the Fund by the Employer on behalf of the Taxpayer is not non-arm's length income of the Fund. | Detailed Reasoning - Question 1 - Employment termination payment: Section 995-1 of the Income Tax Assessment Act 1997 (the ITAA 1997) states: employment termination payment has the meaning given by section 82-130. Subsection 82-130(1) of the ITAA 1997 states: | Detailed Reasoning - A payment is an employment termination payment if:: · it is received by you: · in consequence of the termination of your employment; or · after another persons death, in consequence of the termination of the other persons employment; and · it is received no later than 12 months after the termination (but see subsection (4)); and · it is not a payment mentioned in section 82-135. | Detailed Reasoning - Life benefit termination payment: Where an employer termination payment is made during the life of a taxpayer, the employment termination payment is known as a life benefit termination payment under subsection 82-130(2) of the ITAA 1997. | Detailed Reasoning - Payment in consequence of the termination of employment: The phrase 'in consequence of' is not defined in the ITAA 1997. However, the phrase 'in consequence of termination of employment' has been interpreted by the courts in several cases. Of note are the decisions made by the High Court in Reseck v. Federal Commissioner of Taxation 1 and the Full Federal Court in McIntosh v Federal Commissioner of Taxation 2 . Both Courts' views were that for a payment to be made in consequence of the termination of employment it had to follow on as a result or effect of the termination of employment. Additionally, while it is not necessary to show that termination of employment is the sole or dominant cause, a temporal sequence alone would not be sufficient. The Commissioner has issued Taxation Ruling TR 2003/13 (TR 2003/13) which discusses the meaning of the phrase, taking into account the views of the courts. In paragraph 5 of TR 2003/13 the Commissioner states: 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. In other words, but for the termination of employment, the payment would not have been made to the taxpayer. As further stated by the Commissioner in paragraph 6 of TR 2003/13, there must be: 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 made in consequence of the termination of employment will be determined by the relevant facts and circumstances of each case. Therefore, if a payment follows as an effect of, or results from, the termination of employment, the payment will be considered as made in consequence of the termination of employment for the purposes of subparagraph 82-130(1)(a)(i) of the ITAA 1997. It should also be noted that a payment received in consequence of the termination of employment does not arise from the performance of services under a contract of employment. Rather, the payment arises from the termination of those services. | Detailed Reasoning - Payment to be made to the Employee: In relation to the termination of the Taxpayer's employment, the Employer will, pursuant to the Employment Contract and the Deed, make a termination payment (the Payment) to the Taxpayer. | Detailed Reasoning - Payment is made in consequence of the termination of employment: As is required by sub-paragraph 82-130(1)(a)(i) of the ITAA 1997, for a payment to be an employment termination payment there must be a payment that is made in consequence of the termination of employment of the taxpayer. The termination of employment and the Payment to be made are all intertwined and connected. If not for the termination of employment, the Employer would not have made the Payment to the Employee. The Commissioner, therefore, accepts that the Payment to be made to the Employee is in consequence of the termination of his employment. Based on the information provided, the Commissioner is satisfied that the Payment is, when made, in consequence of the termination of the Taxpayer's employment. | Detailed Reasoning - Payment is received no later than 12 months after termination: The second condition for a payment to be an employment termination payment, as is stipulated in paragraph 82-130(1)(b) of the ITAA 1997, is that the payment must be received within 12 months of the employee's termination of employment, unless they are covered by a determination exempting them from the 12 month rule. The Taxpayer's employment was terminated in the first quarter of the 2011-2012 income year. As long as the Payment is made within 12 months from the date of termination of the employment, the requirement of paragraph 82-130(1)(b) of the ITAA 1997 will be met. | Detailed Reasoning - Not a payment mentioned in section 82-135 of the ITAA 1997: Section 82-135 of the ITAA 1997 lists payments that are not employment termination payments. Apart from paragraph (j) of that section, which states that a capital payment for, or in respect of, a legally enforceable contract in restraint of trade is not an employment termination payment, the Commissioner is satisfied that the Payment does not otherwise fall within any of the exclusions under that section. The Employment Contract prohibits the Taxpayer from performing management services on the Taxpayer's own account or for any other person, firm, company or business for a period of six months after termination of employment. Under the Employment Contract, the Taxpayer acknowledged that the restraint in trade stipulated therein was reasonable given the termination payment payable under the Employment Contract. No dollar amount has, however, been specified for the restraint of trade in the Employment Contract. Neither is there any reference to restraint of trade in the Deed, which merely states that: Certain disputes have arisen between the Employer and the Employee [i.e. the Taxpayer] as to: · the entitlement of the Employee to the payment of a termination payment under the Employment Contract; · claims which the Employer has alleged it has against the Employee and which the Employee has denied exist. Secondly, the Deed merely defines "Termination Payment" as meaning the agreed amount. It does not say whether the amount includes an amount for restrain of trade and, if so, what that amount is. Furthermore, it has been confirmed that it is not the intention of both the Employer and the Taxpayer to treat any part of that payment as a consideration given by the Employer in return for the Taxpayer undertaking a restraint of trade after Taxpayer's employment was terminated. Having considered the above, the Commissioner accepts that no part of the Payment should be treated as a capital payment for, or in respect of, a legally enforceable contract in restraint of trade. It follows that the requirement under paragraph 82-130(c) of the ITAA 1997 is therefore met. | Detailed Reasoning - Commissioner's view: As all the requirements under subsection 82-130(1) of the ITAA 1997 are met, the Payment to be made to the Taxpayer by the Employer is, in its entirety, an employment termination payment. | Detailed Reasoning - Question 2 - Transitional termination payment: Division 82 of the Income Tax (Transitional Provisions) Act 1997 (the ITTPA) provides for transitional arrangements to apply to a life benefit termination payment payable to a person if the person was, on 9 May 2006, entitled contractually to a payment on termination of employment. Subsection 82-10(1) of the ITTPA states that: This Division applies in relation to a life benefit termination payment received by you on or after 1 July 2007 if: (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law or a workplace agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. Subsections 82-10(2), (3), (4) and (6) of the ITTPA state that: (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82-E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (a) by a method or formula for working out the amount; (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. | Detailed Reasoning - Example:: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. (6) In this Division: | Detailed Reasoning - transitional termination payment means:: a life benefit termination payment to which this Division applies; or if this Division applies to only part of a life benefit termination payment - that part of the payment. | Detailed Reasoning - Entitlement provided for before 10 May 2006: The Employment Contract was effective from a date earlier than 9 May 2006 and continued annually unless reviewed or terminated. Under the Employment Contract, the Taxpayer's remuneration was a specified amount per year and, on termination of the employment by the Employer or upon resignation of the employment by the Taxpayer, the Employer would pay the Taxpayer a payment equivalent to a specified multiple of the Taxpayer's annual remuneration as set out in the Employment Contract or as varied subsequently. The information provided shows that apart from the Taxpayer's annual remuneration being revised from the amount specified in the Employment Contract to another specified amount in the second half of the 2000's the Employment Contract had not otherwise been reviewed and had remained in force until the Taxpayer retired. The Commissioner, therefore, accepts that the Taxpayer's entitlement to a life benefit termination payment was provided for in the Employment Contract, which had been in force before mid 2006. The Taxpayer's entitlement to a life benefit termination payment is based on a specified multiple of the Taxpayer's annual remuneration. The Commissioner accepts that as this is "a method or formula for working out the amount" as stated in paragraph 82-10(4)(a) of the ITTPA, the Employment Contract did specify "a way to work out a specific amount" as is required by subsection 82-10(3) of the ITTPA. | Detailed Reasoning - Dispute between Taxpayer and Employer: When the Taxpayer requested the Employer to make a life benefit termination payment in accordance with the Employment Contract, the Employer took issue with certain matters and disputed the Taxpayer's entitlement as well as the quantum of the entitlement. The Employer also claimed cashflow difficulties in making the payment. While denying the matters raised by the Employer, the Taxpayer was desirous to "move on" and decided to accept the lesser amount offered by the Employer under the Deed. Given the circumstances in which the Taxpayer's original entitlement to a life benefit termination payment under the Employment Contract was watered down, the Commissioner is of the view that the settled amount can nevertheless trace its source back to the Employment Contract. If the Taxpayer's contractual entitlement had not been in place, the Employer could simply have refused to make any payment at all and would not have entered into the Deed, since it was the Employer that initiated the dispute. | Detailed Reasoning - Commissioner's view: The Commissioner therefore accepts that the life benefit termination payment receivable by the Taxpayer is a TTP, provided that the TTP is received by the Taxpayer on or before 30 June 2012 as per subsection 82-10(2) of the ITTPA. | Detailed Reasoning - Question 3 - Taxable and tax free components of TTP: Prior to making a TTP to an individual, a payer must give an individual a pre-payment statement as is required by section 82-10E of the ITTPA. That section states that: (1) This section applies if an entity (the payer ) proposes to pay a transitional termination payment to an individual. (2) The payer must give the individual a statement (a pre-payment statement ) meeting the requirements of this section. (3) The statement must include the following information: (a) the amount (if any) that would be the tax free component of the transitional termination payment; (b) the amount (if any) that would be the taxable component of the transitional termination payment; (c) any other information specified in the regulations. (4) The statement must also include details of the opportunity to make a choice in accordance with section 82-10F. Where an individual entitled to a TTP chooses, within 30 days after a pre-payment statement about a TTP is given to that individual, to direct the payer of the TTP to use all or part of the TTP to make a directed termination payment (DTP) to a complying superannuation fund on behalf of that individual, the choice must be made in accordance with the following subsections 82-10F(3) and (4) of the ITTPA: (3) To make the choice, the individual must: (a) make it in the approved form; and (b) give the completed form to the payer. (4) The payer must, immediately after receiving a completed form under subsection (3): (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and (b) comply with the direction (or directions) in the form. | Detailed Reasoning - What Taxpayer intends to do: Nothing in Division 82 of the ITTPA specifies how the taxable and tax free components of a TTP is to be allocated between that part of the TTP which is to be made as a DTP on behalf of an individual and that part of the TTP which is to be paid to the individual in cash. The advice given to the Commissioner is that the Taxpayer intends to instruct the Employer to pay the taxable component of the TTP as a DTP to the Fund and to receive the tax free component of the TTP in cash. | Detailed Reasoning - Commissioner's view: Notwithstanding this advice and provided that the Employer agrees to make a TTP to the Taxpayer, the Commissioner does not have any issue with the Taxpayer instructing the Employer ultimately to make a DTP on the Taxpayer's behalf to the Fund that comprises: · the taxable component; and · the tax-free component · of the entire TTP) or comprises the components in any other proportions as the Taxpayer may choose. | Detailed Reasoning - Question 4- DTP and concessional contributions: It is stated in section 292-25 of the ITTPA that: (1) The taxable component of a directed termination payment (within the meaning of section 82-10F) made in a financial year on behalf of you is not included in your concessional contributions (see section 292-25 of the Income Tax Assessment Act 1997 ) for the financial year, to the extent that the component does not exceed the amount mentioned in subsection (2). (2) The amount is $1,000,000, reduced by the taxable component of every transitional termination payment (within the meaning of section 82-10) made to you during the period: (a) starting on 1 July 2007; and (b) ending just before the directed termination payment was made. | Detailed Reasoning - On the basis that:: · the taxable component of the DTP to be made by the Employer on behalf of the Taxpayer is within the $1,000,000 cap stipulated in subsection 292-25(2) of the ITTPA; · the Taxpayer has not received any previous TTP; and · the DTP is made in the financial year ending 30 June 2012 · the Commissioner is of the view that no part of the taxable component of this DTP is included in the Taxpayer's concessional contributions for that financial year. It should be noted that, pursuant to item 3 of subsection 295-190(1) of the ITAA 1997, the taxable component of a DTP is included in the assessable income of a complying superannuation fund. | Detailed Reasoning - Question 5 - DTP, concessional and non-concessional contributions: With regard to the tax free component, subsection 292-25(1A) of the ITTPA states that: To avoid doubt, the tax free component of a directed termination payment (within the meaning of section 82-10F) made in a financial year on behalf of you is not included in your concessional contributions (see section 292-25 of the Income Tax Assessment Act 1997 ) for the financial year. In section 292-90 of the ITTPA it is stated that: The tax free component of a directed termination payment (within the meaning of section 82-10F) made in a financial year on behalf of you is not included in your non-concessional contributions (see section 292-90 of the Income Tax Assessment Act 1997 ) for the financial year. It follows that if: · the DTP to be made by the Employer on behalf of the Taxpayer to the Fund includes a tax free component; and · is made in the financial year ending 30 June 2012 · the tax free component is neither included in the concessional contributions, nor in the non-concessional contributions, of the Taxpayer for that financial year. | Detailed Reasoning - Question 6 - Non-arm's length income of superannuation fund: In accordance with section 295-545 of the ITAA 1997, the taxable income of a complying superannuation Fund is split into a 'non-arm's length component' and a 'low tax component'. Any income falling within the non-arm's length component is reduced by any deductions to the extent that the deductions are attributable to that income and is then taxed at the highest marginal rate (currently 45%). The remaining part of the taxable income of the complying superannuation fund for the income year is the low tax component, which is taxed at a concessional rate (currently 15%). Pursuant to subsection 295-545(2) of the ITAA 1997, the non-arm's length component is the non-arm's length income of the complying superannuation fund. Non-arm's length income includes, under subsection 295-550(1) of the ITAA 1997, an amount of ordinary income or statutory income of a complying superannuation fund if the amount: · is derived from a scheme the parties to which were not dealing with each other at arm's length in relation to the scheme; and · is more than the amount that the complying superannuation fund might have been expected to derive if those parties had been dealing with each other at arm's length in relation to the scheme. Subsection 995-1(1) of the ITAA 1997 states, in relation to the term 'arm's length', that: … in determining whether parties deal at arm's length, consider any connection between them and any other relevant circumstance. | Detailed Reasoning - Whether scheme and non-arm's length dealing existed: The DTP to be made to the Fund originated from the Taxpayer's entitlement to a payment on termination of employment under the Employment Contract entered in the early 2000's and will be made under the Deed if the Taxpayer requests the Employer to do so. It is not something derived from a scheme. Neither does it occur to the Commissioner that the Taxpayer and the Employer were not dealing with each other at arm's length. | Detailed Reasoning - What the Commissioner has noted, from the information provided, is that:: · the Taxpayer has never been a shareholder of the Employer and/or any company within the Employer's group of companies; · when the Taxpayer's remuneration was raised in boarding meeting, the Taxpayer did not take any part in the discussion; · according to an external entity providing advice on executive remuneration and incentives, the Taxpayer's remuneration package after the increase in the second half of the 2000's was considered a "market amount", and the "retirement allowance" of the specified multiple of the Taxpayer's annual remuneration was also considered reasonable; and · the Taxpayer could only secure a lesser amount for a life benefit termination payment under the Deed. | Detailed Reasoning - Commissioner's view: The Commissioner is, therefore, of the view that the DTP to be made by the Employer to the Fund on behalf of the Taxpayer is not non-arm's length income of the Fund.

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