ATO Interpretative Decision
ATO ID 2001/11 (Withdrawn)
Eligible Termination Payments (Out of Court Settlement Payment)
FOI status: may be released
||This ATO ID is withdrawn as it is superseded by TR 2009/2: Income Tax: Genuine redundancy payments, and TR 2003/13: Income tax: eligible termination payments (ETP): payments made in consequence of the termination of any employment: meaning of the phrase 'in consequence of'.
||This document has changed over time. View its history.
Status of this decision: Decision Withdrawn 23 July 2010
|CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.|
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Whether the taxpayer's out of court settlement payment qualifies as an Eligible Termination Payment.
The out of court settlement payment does qualify as an Eligible Termination Payment.
The taxpayer whose employment was terminated, lodged an application to a State Industrial Relations Commission claiming unfair dismissal by the employer on the grounds of disability. An agreement was subsequently reached in which the employer was required to pay the taxpayer an out of court settlement and the taxpayer was required to resign from employment as from the date of the payment.
Reasons For Decision
Income Tax Ruling IT 2424 states that a '... payment received by way of settlement ... in respect of an unlawful act of dismissal qualifies as an eligible termination payment. Essentially, the compensation payment for unlawful dismissal ... is considered to be made "in consequence of the termination of employment of the taxpayer"'.
The out of court settlement payment paid to the taxpayer qualifies as an eligible termination payment in accordance with paragraph (a) of the definition of an eligible termination payment in subsection 27A(1) of the Income Tax Assessment Act 1936 .
Date of decision: 25 September 1998
Income Tax Assessment Act 1936
Related Public Rulings (including Determinations)
Eligible Termination Payment
Dismissal of employees
In consequence of termination of employment
Business Line: Private Groups and High Wealth Individuals
Date of publication: 4 June 2001