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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-40 - RULES AFFECTING EMPLOYEES AND OTHER TAXPAYERS RECEIVING PAYG WITHHOLDING PAYMENTS    View history reference

Division 82 - Employment termination payments    View history reference

Subdivision 82-C - Key concepts    View history reference

Operative provisions

SECTION 82-130  What is an employment termination payment?  

 View history reference

82-130(1)  

A payment is an employment termination payment if:


(a) it is received by you:


(i) in consequence of the termination of your employment; or

(ii) after another person's death, in consequence of the termination of the other person's employment; and


(b) it is received no later than 12 months after that termination (but see subsection (4)); and


(c) it is not a payment mentioned in section 82-135.

Note 1:

If a payment would be an employment termination payment but for paragraph (b), see subsection (4) and section 83-295.

Note 2:

The holding of an office is treated as employment for this Part: see section 80-5. Also, the termination of employment is treated as including the termination of employment by retirement or by death: see section 80-10.

Types of employment termination payment

82-130(2)  

A life benefit termination payment is an *employment termination payment to which subparagraph (1)(a)(i) applies.

82-130(3)  

A death benefit termination payment is an *employment termination payment to which subparagraph (1)(a)(ii) applies.

Exemption from 12 month rule

82-130(4)  

Paragraph (1)(b) does not apply to you if:


(a) you are covered by a determination under subsection (5) or (7); or


(b) the payment is a *genuine redundancy payment or an *early retirement scheme payment.

Note:

The part of a genuine redundancy payment or an early retirement scheme payment worked out under section 83-170 is not an employment termination payment: see section 82-135.

82-130(5)  

The Commissioner may determine, in writing, that paragraph (1)(b) does not apply to you if the Commissioner considers the time between the employment termination and the payment to be reasonable, having regard to the following:


(a) the circumstances of the employment termination, including any dispute in relation to the termination;


(b) the circumstances of the payment;


(c) the circumstances of the person making the payment;


(d) any other relevant circumstances.

82-130(6)  

A determination under subsection (5) is not a legislative instrument.

82-130(7)  

The Commissioner may, by legislative instrument, determine that paragraph (1)(b) does not apply to either or both of the following, as specified in the determination:


(a) a class of payments;


(b) a class of recipients of payments.

[CCH Note 1: The Commissioner has made "Employment Termination Payments Redundancy Trusts (12 month rule) Determination 2009", effective 13 March 2009, which reads:

3. Application  
This determination applies to a payment received after 30 June 2007 by a person if the payment is received from a redundancy trust:


(a) either


(i) in consequence of the termination of that person's employment, or

(ii) after another person's death, in consequence of the termination of that other person's employment; and


(b) more than 12 months after that termination; and


(c) is not a payment under section 82-135 of the Income Tax Assessment Act 1997.In this determination, such a payment is called a late termination payment.

4. Determination  
Paragraph 82-130(1)(b) of the Income Tax Assessment Act 1997 does not apply to a late termination payment if:


(a) the person whose employment was terminated was a member of a redundancy trust and an application for the payment was lodged with the trustee of the redundancy trust within 12 months of the person becoming entitled to the payment under the terms of the trust deed of the redundancy trust; and


(b) the payment was made by the trustee of the redundancy trust:


(i) as soon as practicable after receipt of the application for payment; or

(ii) no later than 2 years after the termination of the person's employment that led to the entitlement;
whichever occurs earlier; or


(c) immediately before 1 July 2007 the member of the redundancy trust had an existing entitlement to a payment from the redundancy trust as a consequence of a termination of employment of the person before 1 July 2007 and the payment of the benefit was made by the trustee of the redundancy trust prior to 1 July 2010.

5. Definitions  
In this Determination:

'redundancy trust' means:


(a) a workers entitlement fund that was established prior to 1 April 2003; or


(b) is a prescribed workers entitlement fund listed in Schedule 3 to the Fringe Benefits Tax Regulations 1992.

'member of a redundancy trust' means a person who is entitled to a payment/s under the terms of the redundancy trust's deed due to termination of employment.

]

[CCH Note 2: The Commissioner has made "Employment Termination Payments (12 month rule) Legislative Instrument 2007", effective 16 November 2007, which reads:

3. Application  

This determination applies to a payment received after 30 June 2007 by a person if the payment is received:


(a) either


i) in consequence of the termination of that person's employment, or

ii) after another person's death, in consequence of the termination of that other person's employment; and


(b) more than 12 months after that termination; and


(c) is not a payment under section 82-135 of the Income Tax Assessment Act 1997.

In this determination, such a payment is called a late termination payment.

4. Determination  

Paragraph 82-130(1)(b) of the Income Tax Assessment Act 1997 does not apply to a late termination payment if the payment is received more than 12 months after the termination of a person's employment because:


(a) legal action was commenced within 12 months of the termination of employment, of which the subject is either or both:


i) the person's entitlement to the payment;

ii) the amount of the person's entitlement; or


(b) the payment was made by a liquidator, receiver or trustee in bankruptcy of an entity that is otherwise liable to make the payment, where that liquidator, receiver or trustee is appointed no later than 12 months after the termination of employment.

5. Definitions  

In this Determination:

'liquidator' means a person who becomes a liquidator of a company and who has given the Commissioner of Taxation notice of that fact under subsection 260-45(2) of Schedule 1 to the Taxation Administration Act 1953.

'receiver' means a person who, in the capacity of receiver, or of receiver and manager, takes possession of a company's assets for the company's debenture holders and who has given the Commissioner of Taxation notice of that fact under subsection 260-75(2) of Schedule 1 to the Taxation Administration Act 1953.

'trustee in bankruptcy' means a person who, in the capacity of 'the trustee' as defined in section 5 of the Bankruptcy Act 1966, notifies the Commissioner of Taxation of the bankruptcy.

]

82-130(8)  

A determination under subsection (7) may provide for paragraph (1)(b) not to apply in circumstances relating to any (or all) of the following, as specified in the determination:


(a) a class of employment termination (including a class described by reference to disputes of a specified type);


(b) a class of payments;


(c) a class of persons making payments;


(d) the period after the employment termination until payment is received;


(e) any other relevant circumstances.


 



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