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  

Division 82 - Employment termination payments  

Subdivision 82-A - Employment termination payments: life benefits  

Operative provisions

SECTION 82-10   Taxation of life benefit termination payments  

Tax free component

82-10(1)    
The *tax free component of a *life benefit termination payment you receive is not assessable income and is not *exempt income.

Taxable component

82-10(2)    
The *taxable component of the payment is assessable income.

82-10(3)    
You are entitled to a *tax offset that ensures that the rate of income tax on the amount mentioned in subsection (4) does not exceed:

(a) if you are your *preservation age or older on the last day of the income year in which you receive the payment - 15%; or

(b) otherwise - 30%.

Note:

The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986 .

82-10(4)    

The amount is so much of the * taxable component of the payment as does not exceed the smallest of the following:

(a) the * ETP cap amount reduced (but not below zero) by:

(i) if the payment is a payment of a kind referred to in subsection (6) (an excluded payment ) - the amount worked out under this subsection for each * life benefit termination payment you have received earlier in the income year to the extent that it is an excluded payment; or

(ii) if the payment is not an excluded payment - the amount worked out under this subsection for each life benefit termination payment you have received earlier in the income year;

(b) the ETP cap amount reduced (but not below zero) by:

(i) if the payment is an excluded payment - the amount worked out under this subsection for each life benefit termination payment you have received earlier in consequence of the same employment termination (whether in the income year or an earlier income year) to the extent that it is an excluded payment; or

(ii) if the payment is not an excluded payment - the amount worked out under this subsection for each life benefit termination payment you have received earlier in consequence of the same employment termination (whether in the income year or an earlier income year);

(c) if the payment is not an excluded payment - $ 180,000, reduced (but not below zero) by your taxable income for the income year in which the payment is made.

Note 1:

For the ETP cap amount , see section 82-160 .

Note 2:

If you have also received a death benefit termination payment in the same income year, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the death benefit termination payment (under section 82-65 or 82-70 ).

Note 3:

Certain other life benefit termination payments made before 1 July 2012 may be treated as earlier payments under paragraph (4)(b): see section 82-10H of the Income Tax (Transitional Provisions) Act 1997 .

82-10(5)    

In working out, for the purposes of paragraph (4)(c), your taxable income for the income year, disregard:

(a) the taxable component of the payment; and

(b) the taxable component of each * life benefit termination payment you receive later in the income year.

82-10(6)    

Paragraph (4)(c) does not apply in relation to * life benefit termination payments:

(a) that are * genuine redundancy payments, or that would be genuine redundancy payments but for paragraph 83-175(2)(a) ; or

(b) that are * early retirement scheme payments; or

(c) that include * invalidity segments, or what would be invalidity segments included in such payments but for paragraph 82-150(1)(c) ; or

(d) that:

(i) are paid in connection with a genuine dispute; and

(ii) are principally compensation for personal injury, unfair dismissal, harassment, discrimination or a matter prescribed by the regulations; and

(iii) exceed the amount that could, at the time of the termination of your employment, reasonably be expected to be received by you in consequence of the voluntary termination of your employment.

82-10(7)    

If the payment is partly an excluded payment:

(a) subsection (4) applies as if the payment were 2 payments as follows:

(i) first, a payment consisting only of the part of the payment that is an excluded payment;

(ii) second, another payment, made immediately after the first payment, consisting only of the part of the payment that is not an excluded payment; and

(b) subsection (4) applies to the second payment as if a reference in subsection (5) to the taxable component of a payment were a reference to so much of the taxable component as relates to the part of the payment that is not an excluded payment.

82-10(8)    

Despite subsections (4) and (7), the amount mentioned in subsection (4) in relation to the payment must not exceed either of the following:

(a) the * ETP cap amount reduced (but not below zero) by the amount worked out under subsection (4) for each * life benefit termination payment you have received earlier in the income year;

(b) the ETP cap amount reduced (but not below zero) by the amount worked out under subsection (4) for each life benefit termination payment you have received earlier in consequence of the same employment termination (whether in the income year or an earlier income year).