ATO Interpretative Decision
ATO ID 2001/8
Income Tax
Superannuation: Eligible Termination Payments (Payout of Novated Lease)
FOI status: may be released
Status of this decision: Decision Current
 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.
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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. |
Issue
Whether the payout of a novated lease which was paid as part of the taxpayer employee's redundancy package will be assessable in the hands of the taxpayer as an eligible termination payment (ETP), or whether it is to be treated as an expense fringe benefit.
Decision
The payout of a novated lease which was paid as part of the taxpayer's redundancy package will be assessable in the hands of the employee as an eligible termination payment (ETP), and not treated as an expense fringe benefit.
Facts
The taxpayer was offered a redundancy package by his employer which included the payout of a novated lease. The lease was in the taxpayer's name and gave the taxpayer clear title to the vehicle after the payout was made.
Reasons For Decision
The payout of a novated lease is an ETP, as defined in subsection 27A(1) of Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 (ITAA 1936), as it was a payment made in respect of the taxpayer as a consequence of the termination of employment. The High Court in Reseck v FCT (1975) 133 CLR 45, has said that 'within the ordinary meaning of the words a sum is paid in consequence of the termination of employment when the payment follows as an effect or result of the termination' - refer also to the decision of the Full Federal Court in McIntosh v FC of T 79 ATC 4325, and Taxation Ruling TR 96/13
Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 defines 'fringe benefit' and specifically excludes an ETP within the meaning of Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 at paragraph (k). The payout of the novated lease is, therefore, not an expense payment fringe benefit.
Date of decision: 19 January 1998
Legislative References:
Income Tax Assessment Act 1936
subsections 27A(1) Fringe Benefits Tax Assessment Act 1986
subsection 136(1)
Case References:
Reseck v. FC of T
75 ATC 4213
(1975) 5 ATR 538 McIntosh v. FC of T
79 ATC 4325
(1979) 20 ATR 13
Related Public Rulings (including Determinations)
TR 96/13
Keywords
Bona fide redundancy payments
Eligible termination payments
Eligible termination payments- PAYG issue
ETP components
Expense payment fringe benefits
Golden handshakes
Redundancy or early retirement scheme payments
Vehicle leasing & hire
Date of publication: 4 June 2001
ISSN: 1445-2782
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