ATO Interpretative Decision
ATO ID 2001/19 (Withdrawn)
Superannuation: Bona Fide Redundancy (Completed Employment Contract)
FOI status: may be released
||This ATO ID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.
||This document has changed over time. View its history.
Status of this decision: Decision Withdrawn 9 May 2008
|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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 severance payments made at the end of a completed employment contract are bona fide redundancy payments for the purposes of section 27F of the Income Tax Assessment Act 1936
The severance payments made at the end of a completed employment contract are not bona fide redundancy payments for the purposes of section 27F of the Income Tax Assessment Act 1936
The facts are:
- the employees are employed for a fixed-term;
- the employment contract specifies the start date and finish date of the employment (the finish date can be on completion of a specific task or project);
- the contract cannot be terminated by the employer other than during a probationary period or due to serious or wilful misconduct;
- an employee may be entitled to a severance payment or retrenchment benefit if the contract is not renewed in certain circumstances; and
- the termination of employees did not occur prior to the date on which the employee completed the particular period of service.
Reasons For Decision
For an amount to be a bona fide redundancy payment it must meet the requirements set out in section 27F of the Income Tax Assessment Act 1936 . Subparagraph 27F(1)(b)(i) of the Income Tax Assessment Act 1936 requires that termination must occur before the taxpayer's employment would have terminated under the terms of employment because of the taxpayer attaining a certain age or completing a certain period of service.
As the employees' services were terminated upon the completion of their contracts the severance payment did not satisfy subparagraph 27F(1)(b)(i) of the Income Tax Assessment Act 1936 and therefore are not a bona fide redundancy payment.
Date of decision: 16 September 1998
Income Tax Assessment Act 1936
Related Public Rulings (including Determinations)
Bona fide redundancy payment
Business Line: Superannuation
Date of publication: 4 June 2001