Fidge v FC of T

Members:
R Olding SM

Tribunal:
Administrative Appeals Tribunal, Canberra

MEDIA NEUTRAL CITATION: [2023] AATA 4245

Decision date: 22 December 2023

R Olding (Senior Member)

WHAT IS THIS CASE ABOUT?

1. The applicant, Mr Fidge, was a colonel in the Regular Army with an acknowledged record of exemplary service. After the expiry of an overseas posting, the Chief of Army advised Mr Fidge that "workplace planning deliberations have confirmed that there will not be a full-time position available to you following your current role" and that, as a result, he would be compulsorily transferred from the Permanent Forces to the Army Reserve.

2. Was Mr Fidge dismissed because his position was genuinely redundant? That is the sole issue for determination in this case. If the question is answered in the affirmative, the special benefit payment Mr Fidge received, consequent upon the compulsory transfer, attracts concessional income tax treatment.[1] The Commissioner accepts the other statutory eligibility criteria for concessional treatment of the payment are satisfied.

INCOME TAX ASSESSMENT ACT 1997, SECTION 83-175(1)

3. This matter turns upon whether the payment is covered by s 83-175(1) of the Income Tax Assessment Act 1997 (Cth)(" ITAA 1997 "), which provides that:

A genuine redundancy payment is so much of a payment received by an employee who is dismissed from employment because the employee's position is genuinely redundant as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of dismissal.

4. Although s 83-175(1) contemplates apportionment of a payment, the parties agree that the payment is either covered by s 83-175(1) in its entirety or not at all.

5. Section 83-175(1) is located in Part 2-40 of the ITAA 1997. Section 80-5 in that Part provides:

Holding of an office

If a person holds (or has held) an office, this Part applies to the person in the same way as it would apply if the person were (or had been) employed.

6. It is common ground that Mr Fidge was not an employee but that, as he was the holder of an office under legislation governing military service, s 83-175(1) applies, by force of s 80-5, as if he had been employed.

THE FACTS

7. The Commissioner helpfully stated that the facts as set out in the applicant's Statement of Facts, Issues and Contentions, at paragraphs 1 to 30 - reproduced as Appendix 1 to these reasons - are not disputed. Being satisfied it is appropriate to do so, I find accordingly.

8. To assist in understanding the discussion that follows, I draw attention to these facts:

9. In view of the Chief of Army's statement in the Notice Letter, there can be no suggestion that there were any performance issues relevant to the compulsory transfer. In fact, Mr Fidge's long service was "exemplary". The Commissioner did not submit otherwise. I find accordingly.

THE PARTIES' SUBMISSIONS IN SUMMARY

10. The applicant submits that "there can be no sensible doubt that Mr Fidge, or his position as a member of the Permanent Forces, was superfluous to the needs of the Defence Force." It follows, the applicant says, that Mr Fidge or his position as a member of the Permanent Forces was redundant within the meaning of s 83-175(1).

11. In support of this submission, the applicant argues that s 83-175(1) was intended to have the same effect as the former s 27F of the Income Tax Assessment Act 1936 (Cth) (" ITAA 1936 "). The submission then relies upon the judgement of the Full Federal Court in
Dibb v Federal Commissioner of Taxation[2] [2004] FCAFC 126 . which concerned the former s 27F and is discussed below.

12. Alternatively, the applicant says he is entitled to rely upon Taxation Ruling TR 2009/2 in which the Commissioner expressed the view that the treatment of genuine redundancy payments under the ITAA 1997 is to be identical to the treatment of bona fide redundancy payments under the ITAA 1936.

13. The Commissioner's submissions focus on the requirement in s 83-175(1) for the employee's position to be redundant, not the employee him or herself, relying on the judgement of the Full Federal Court in
Weeks v Commissioner of Taxation,[3] [2013] FCAFC 2 . which is also discussed further below.

14. In that regard, the Commissioner identifies the relevant position as the Defence Attaché-Ankara and says that position was not redundant as its duties were to continue to be performed by another officer after Mr Fidge's posting ended. The Commissioner apparently takes that view because, even though the compulsory transfer to the Reserves was effected by the Dismissal Letter, by the time of the Notice Letter it was the case that there was unlikely to be a position for Mr Fidge. It was the Notice Letter, the Commissioner says, that "first crystallised" the process leading to the CITR.

15. Alternatively, if, contrary to the Commissioner's primary submission, the relevant position was Mr Fidge's office as a member of the Permanent

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Forces as the applicant submits, the Commissioner says the applicant has not proved[4] The applicant has the burden of proving the relevant assessment is excessive: Taxation Administration Act 1953 (Cth), s 14ZZK. that position was redundant as it is axiomatic that the Permanent Forces have an ongoing need for members. Additionally, the Commissioner says that in any case a position becoming redundant was not the cause of Mr Fidge's dismissal; rather, it was the transfer to the Reserves that caused Mr Fidge's office as a member of the Permanent Forces to cease to exist.

16. Additionally, the Commissioner denies the applicant was entitled to rely upon Taxation Ruling TR 2009/2 to take the position that the payment was a genuine redundancy payment as defined in s 83-175(1).

LEGISLATIVE HISTORY

17. The former s 27F of the ITAA 1936 applied from 1984 to 2006. As originally enacted - there were no material changes - s 27F read:

Bona fide redundancy payments

Where -

  • (a) an eligible termination payment is made in relation to a taxpayer in consequence of the dismissal of the taxpayer from any employment at any time (in this sub-section referred to as the 'termination time' by reason of the bona fide redundancy of the taxpayer;
  • …

so much of the eligible termination payment as exceeds the amount of an eligible termination payment that could reasonably be expected to have been made in relation to the taxpayer had he voluntarily retired from that employment at the termination time is a bona fide redundancy payment in relation to the taxpayer.

18. The expressions "dismissal" and "redundancy" were not defined. "Dismissal" is self-explanatory - involuntary termination of one's employment. The Explanatory Memorandum to the bill that introduced s 27F - the Income Tax Assessment Amendment Bill (No. 3) 1984 - stated, in relation to "redundancy", that:

"Redundancy" carries with it the concept that the requirements of the employer for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where they were so employed, have ceased or diminished or are expected to cease or diminish. Redundancy, however, would not extend to the dismissal of an employee for personal or disciplinary reasons or for reasons that the employee was inefficient.

19. Inferentially, the concessional tax treatment was intended to apply where an employee is dismissed, not because of their performance but because the requirements of the employer have changed such that there is no longer a requirement for duties of the kind the employee hitherto carried out. That is broadly consistent with the explanation in the then Treasurer's Economic Statement May 1983, announcing changes to the concessional tax treatment of lump sum payments received on termination of employment, that:

a principal element in determining whether a lump sum is a bona fide redundancy payment will be that the recipient's employment has been prematurely brought to an end as part of a reduction in the work-force of the employer or the group of which the employer forms part, and that there is no arrangement for the re-employment of the person.

20. Section 27F of the ITAA 1936 was replaced by s 83-175 of the ITAA 1997. The Explanatory Memorandum to the bill that introduced s 83-175 stated:

4.3 Schedule 2 also contains a number of provisions to move associated payments from the Income Tax Assessment Act 1936 (ITAA 1936) into the Income Tax Assessment Act 1997 (ITAA 1997). These provisions retain the same effect as under existing law but have been rewritten to reflect the current drafting style and to deliver legislative simplification.

…

4.53 Division 83 of the ITAA 1997 contains the provisions related to unused annual leave, used long-service leave, genuine redundancy payments, early retirement scheme payments and foreign termination payments. The provisions relating to these payments are intended to retain their existing application but may have been

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redrafted to reflect current drafting approaches.

PREVIOUS CASES

Dibb

21. The Full Federal Court's judgement in
Dibb v Commissioner of Taxation[5] [2004] FCAFC 126 . concerned the former s 27F. The case was conducted on the basis that:

22. The Full Court adopted the following principles:

23. The Court went on to observe:

43 The difficulty in this case has been caused by the aphorism which appears in both pars 12 and 42 of TD 94/12 to the effect that the job, not the employee, becomes redundant. However s 27F speaks of the 'bona fide redundancy of the taxpayer'. We consider that it is more accurate to say that an employee becomes redundant when his or her job (described by reference to the duties attached to it) is no longer to be performed by any employee of the employer, though this may not be the only circumstance where it could be said that the employee becomes redundant. Re-allocation of duties within an organization will often lead the employer to consider whether an employee, previously employed to perform specific functions assigned to a particular "job", will be able to perform any available "job" existing after such re-allocation. Even if the employee's job, defined by reference to its duties, has disappeared, he or she may be able to perform some other available job to the satisfaction of the employer. In that case, no question of redundancy arises. It is only if the employer considers that there is no available job for which the employee is suited, and that he or she must therefore be dismissed, that the question of redundancy arises. If, in good faith, the employer:


• has re-allocated duties;
• considers that the employee is not suitable to perform any available job, defined by reference to those re-allocated duties, existing after the re-allocation; and
• for that reason, dismisses the employee,

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then, for the purposes of s 27F, the employee is dismissed by reason of his or her bona fide redundancy. In the above discussion we have used the word "available" as meaning "vacant", and the word "suitable" as meaning "within the employee's capacity".

44 In the present case, the employer re-distributed the duties previously performed by its District Managers and at the same time, added further duties. The job, described by reference to its duties as previously performed by Mr Dibb, ceased to exist. The employer no longer wished to have that job performed by anybody. The work was to be differently distributed. The result was that there was no job for which his skills qualified him. He was 'surplus to [AVCO's] personnel needs'. We consider that the respondent was in error in concluding that Mr Dibb's dismissal was not by reason of his bona fide redundancy.

Weeks

24. The passages from Dibb extracted immediately above were cited by the Full Federal Court in
Weeks v Commissioner of Taxation,[6] [2013] FCAFC 2 . which concerned s 83-175(1), the Court observing that:

this reasoning may explain why Parliament decided to use the language "the employee's position is genuinely redundant" in the present s 83-175(1) but it is by reference to that language that the present appeal must be determined.

25. Unlike the current matter, in Weeks the taxpayer's job remained, she was not being "pushed out" and was welcome to return to her role or something closely approximating it. The Court specifically rejected the proposition that, if a person is made redundant, it necessarily follows that the "employee's position is genuinely redundant". Section 83-175(1) applies, the Court said, "only to a limited type of redundancy, being dismissal from employment because the employee's position is genuinely redundant".

DEFENCE LEGISLATION

26. Under s 4(1) of the Defence Act 1903 (Cth):

27. Section 23(1) provides that:

Members of the Permanent Forces are bound to render continuous full time service.

28. It is common ground that, before his transfer to the Reserves, Mr Fidge, as a colonel in the Regular Army, was a member of the Permanent Forces and, as such, bound to render full-time service.

29. Under s 24(1)(b) of the Defence Regulation 2016 (Cth), the Chief of the Army may terminate the service of a member for the reason that "the member cannot usefully serve because of redundancy in the Defence Force".

30. The Chief of the Army did not purport to terminate Mr Fidge under this provision. Rather, the Chief of the Army exercised the power conferred by s 16 of the Regulation, which states:

31. Section 6(2) of the Defence Regulation defines "interests of the Defence Force" as follows:

Reasons for something being or not being in the interests of the Defence Force include reasons relating to one or more of the following:

  • (a) a member's performance;
  • (b) a member's behaviour (including any convictions for criminal or service offences);
  • (c) a member's suitability to serve:
    • (i) in the Defence Force; or
    • (ii) in a particular role or rank;
  • (ca) a member's failure to meet one or more conditions of the member's enlistment, appointment or promotion;
  • (d ) workforce planning in the Defence Force ;
  • (e) the effectiveness and efficiency of the Defence Force;
  • (f) the morale, welfare and discipline of the Defence Force;
  • (g) the reputation and community standing of the Defence Force.
  • (Emphasis added.)

32. It will be recalled that the Dismissal Letter referred to "workforce planning deliberations".

CONSIDERATION OF THE PARTIES' SUBMISSIONS

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Application of s 83-175(1)

Mr Fidge's position

The position of Defence Attaché-Ankara

33. The Commissioner's primary argument is founded on the relevant position for the purposes of s 183-75(1) being Mr Fidge's former posting as Defence Attaché-Ankara. It was when the Notice Letter issued, the Commissioner submitted, that the process leading to Mr Fidge's compulsory transfer to the Reserves "first crystallised". Since the duties of that position were to be carried out by another officer, it follows the position is not redundant.

34. I am unable to accept this argument. It is clear from the Notice Letter that a decision to transfer Mr Fidge to the Reserves, while contemplated, had not been made at that point. To the contrary, as the letter stated, "[e]very effort is being made to find you further employment". The dismissal did not occur until the Chief of Army communicated, in the Dismissal Letter, the decision that Mr Fidge would be compulsorily transferred to the Reserves. By that time, Mr Fidge had been posted to Canberra with his position designated as "senior officer awaiting posting". Accordingly, I reject the submission that the application or otherwise of s 83-175(1) is to be resolved by reference to whether the position of Defence Attaché-Ankara became redundant.

Member of the Permanent Forces

35. The applicant submitted that, in accordance with the provisions of the defence legislation outlined above, the relevant position for the purposes of s 83-175(1) is Mr Fidge's position as a member of the Permanent Forces. That position, or at least Mr Fidge's occupancy of it, came to an end upon his transfer to the Reserves.

36. The basis of this submission is that, on a proper analysis, the office Mr Fidge held was the office of a member of the Permanent Forces. The concept of an "office" is, under s 80-5, the "gateway" into s 83-175(1) for a person, such as Mr Fidge, who is not an employee. On this foundation, the applicant submits that it is Mr Fidge's former office - member of the Permanent Forces - on which the inquiry whether his position is genuinely redundant must focus.

37. The Commissioner maintained his primary submission that the relevant position is Defence Attaché-Ankara. However, if, contrary to that view, the appropriate focus is upon Mr Fidge's position as a member of the Permanent Forces, the Commissioner submitted that the applicant had not proved that position was redundant. As the Commissioner submitted:

It is axiomatic that the Permanent Forces has an ongoing need for members of the Permanent Forces, and such a broadly defined position simply cannot be said to be redundant.[7] Respondent’s Written Outline of Submissions, [164].

Position as Colonel in the Regular Army

38. Neither of the parties' submissions strikes me as an appropriate characterisation of Mr Fidge's position - before his transfer to the Reserves - for the purposes of s 83-175(1).

39. For the reasons already mentioned, I cannot accept that the relevant position was Defence Attaché-Ankara. The applicant's submission that Mr Fidge was a member of the Permanent Forces is undoubtedly correct. But that would be so in respect of any member of the Regular Army. In a context in which the statutory inquiry is into whether a "position" is redundant, examination of the matter at this level - a broad category that embraces any and every role performed by a member of the Permanent Forces - seems unlikely to give an accurate reflection of whether Mr Fidge's particular position was redundant.

40. Against that background, during the hearing I raised with the parties' representatives whether an alternative approach might be to ask whether Mr Fidge's position as a colonel in the Regular Army had become redundant.

41. Ms Kovacs, who appeared for Mr Fidge, embraced the suggestion, in the sense that she argued Mr Fidge's position, whether identified as a member of the Permanent Forces as the applicant's case had been put, or as a member of the Permanent Forces holding the rank of colonel in the Regular Army, was on either analysis genuinely redundant. I return to the arguments put in support of that submission below.

42. The Commissioner had previously pointed out that Mr Fidge's position

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could be characterised in a number of different ways. For example, another characterisation would be as a member of the Regular Army. The Commissioner also argued that, even if Mr Fidge's position for the purposes of s 83-175(1) was as a colonel in the Regular Army, there is no evidence to establish that position was excess to the Army's requirements or otherwise redundant, as discussed further below.

43. In respect of identification of the relevant position for the purposes of s 83-175(1), it seems to me that characterising Mr Fidge's role as a colonel in the Regular Army is a common sense characterisation which most accurately reflects the reality of the role he previously performed and from which, by virtue of his compulsory transfer to the Reserves, he was effectively dismissed. On any view, Mr Fidge held the position of colonel in the Regular Army. That was how his role was designated and it is for the role of a colonel that he was remunerated. It was for a collection of duties of a colonel that the Chief of Army embarked upon a search for before determining that Mr Fidge would be compulsorily transferred to the Reserves. It was not for any role suitable for a member - of the Regular Army or the Permanent Forces more broadly - at any level. It was a role for a colonel that the Chief of Army sought, but was unable to identify, for Mr Fidge to perform.

Characterisation of the compulsory transfer

44. Mr Fidge held a position as a colonel in the Regular Army. The Chief of Army was unable to identify a role for Mr Fidge - in the sense of a collection of duties for Mr Fidge, as a colonel in the Regular Army - to carry out. On the evidence, the Chief of Army effectively said to Mr Fidge: You have given exemplary service, including for seven years as a colonel, but we no longer have a role for you. That is, we have no suitable collection of duties for you, as a colonel, to carry out. Why, then, would his position as a colonel in the Regular Army not be regarded as redundant?

45. The Commissioner submitted this question should be answered effectively on two bases.

46. The first is that, based on the earlier discussion of the authorities, it is necessary to first identify the functions, duties and responsibilities of the relevant position. To the extent that Mr Fidge's position was as a senior officer - a colonel - awaiting posting, there is no evidence of the functions, duties and responsibilities of that position. Accordingly, the Commissioner said, the applicant could not satisfy the burden of proving that position was redundant.

47. In my view, it is important to be mindful when applying s 83-175(1) of the context in which its application arises. In ordinary civilian employment, it is commonplace for an employee to have a designated role in which the duties and responsibilities are clearly set out in a duty statement or similar document or at least clearly understood by employer and employee. The situation is different for those who commit to military service. Although there may be a duty statement or equivalent document for a particular posting, they are required to serve as and where required, as illustrated by Mr Fidge's evidence of the multitude of postings in which he served during his career, including during his time as a colonel. Those postings involved different duties and locations. Essentially, Mr Fidge was required to render full-time service as and where directed. In that context, it is somewhat unrealistic to search for a specified set of specific duties and responsibilities, as may be found in civilian employment, for a member of the Permanent Forces or for an officer of the Regular Army or an officer at the rank of colonel.

48. The second basis on which the Commissioner resists the suggestion that Mr Fidge's position as a colonel in the Regular Army became redundant was that there is no evidence of a reduction in the number of colonels required by the Regular Army. Relatedly, the Commissioner referred to the practice of rotating officers through various postings every two or three years, which Mr Fidge had described in his evidence. Further, the Commissioner pointed to the statement in the Notice Letter that:

CITR enables the career and workforce structures of the Australian Defence Force to be maintained, by creating the opportunity for the reasonable rotation of members through ranks and positions to ensure the Australian Defence Force

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remains a capable and dynamic organisation.

49. Based on this statement, Mr Nellailingam, who appeared for the Commissioner on the second day of the hearing, submitted:

What this is an indication of is they want the applicant out, so they can bring a new hire in. That is what a rotation ultimately is. And if that's the case, Senior Member, there was no positional redundancy.[8] Transcript of proceedings, P-125, lines 1-3.

50. I mean no disrespect to Mr Nellailingam who, along with Mr Daley, ably presented the Commissioner's submissions, in saying that in my view it is something of a leap from the Chief of Army's outline of the benefits of the CITR in creating opportunities for reasonable rotation of members through the ranks and positions to the conclusion that "they want the applicant out, so they can bring a new hire in". There is no suggestion in the Notice Letter that "they want the applicant out" or that the Chief wanted to "bring a new hire in". To the contrary, the Chief specifically stated that "[e]very effort is being made to find you further employment".

51. The position may be summarised as follows:

52. In my view, the correct characterisation of these circumstances is: There was previously a position for a colonel in the Regular Army that Mr Fidge held for some seven years, carrying out duties as and where directed. Due to workforce planning considerations, a decision was taken that his position as a colonel was no longer required. Mr Fidge's former position as a colonel in the Regular Army is therefore properly described as redundant in the sense that the position is excess to the Army's requirements.

53. Having regard to the particular context of military service, I do not consider this conclusion would, as the Commissioner puts it, conflate Mr Fidge's redundancy and the redundancy of his position. Mr Fidge held a position as a colonel in the Regular Army. The position was no longer required because, for reasons of workplace planning, there was no longer a collection of duties to be carried out in that position. The position formerly held by Mr Fidge was excess to the Army's requirements.

Whether dismissal due to redundancy

54. The Commissioner submitted that, if the Tribunal were to conclude that Mr Fidge's position had become redundant, Mr Fidge had not demonstrated that his dismissal was because his position was redundant.

55. The Commissioner put the argument his way:

185. Rather, the CITR of the Applicant to the reserves caused the Applicant's specific office to in the Permanent Forces to cease to exist.

186. The Respondent further reiterates that under s 24(1)(b) of the Defence Regulations 2016, the ADF can terminate the service of members of the permanent forces that it believes are redundant.

187. That the Applicant's employer chose not to do so supports the inference that they did not view the Applicant's position as a member of the permanent forces to be redundant, and that accordingly he was not dismissed from employment because of his position's redundancy.

56. So far as the submission is that it was the CITR rather than the redundancy that caused Mr Fidge's dismissal, I reject the submission. To accept the submission would be to choose form over substance. The practical reality is that the CITR was engaged because, on the view I have taken, Mr Fidge's position was excess to requirements and thus redundant.

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The CITR is the equivalent of a termination occurring consequent upon a position becoming redundant. The Commissioner did not submit that the CITR did not have the effect that Mr Fidge was dismissed from his full-time position (however described).

57. The submission also seeks to draw support from the Chief of Army's decision to engage the CITR process rather than the power to terminate for redundancy under s 24(1)(b) of the Defence Regulation 2016. However, the choice to exercise the CITR was readily explicable by the exemplary service which the Chief recorded Mr Fidge had rendered. In that context, it would not be surprising that, although the position as a full-time Colonel in the Regular Army was no longer required, the Chief might seek to retain Mr Fidge's services in a Reserve capacity. That does not mean the full-time position was not redundant, even less that the transfer and therefore effective dismissal was not caused by the redundancy.

58. Mr Fidge's dismissal was given effect by the compulsory transfer out of his full-time position and into the Reserves. The redundancy caused the compulsory transfer to occur; it would not have occurred but for the redundancy. Thus, the dismissal was because of the redundancy.

TR 2009/2

59. As an alternative submission, the applicant sought to establish that Mr Fidge was entitled to protection from liability on the basis that he had relied upon the Commissioner's ruling,[9] Taxation Administration Act 1953 (Cth), s 357-60. TR 2009/2, for the proposition that s 83-175(1) should be construed in the same way as the former s 27F.

60. Because of the conclusion I have reached, it is not necessary to determine whether Mr Fidge is also entitled to protection on the basis of reliance on this ruling. However, in view of the submissions made, and in case my decision is appealed, I have considered this issue.

61. The applicant relies upon paragraph 4 of TR 2009/2, which states:

Section 27F and the other provisions in the Income Tax Assessment Act 1936 (ITAA 1936) that dealt with the treatment of bona fide redundancy payments were rewritten in section 83-175 and other provisions in Part 2-40 of the ITAA 1997. Unless specifically noted, the Commissioner considers the treatment of genuine redundancy payments under the ITAA 1997 to be identical to the treatment of bona fide redundancy payments under the ITAA 1936. This Ruling may therefore be relied upon to this extent when applying the relevant ITAA 1936 provisions to the 2007-07 income year and prior income years.

62. The first point to note is that this paragraph, in its terms, invites reliance on the ruling when applying the former s 27F, not s 83-175(1). It does not, for example, state that principles from authorities under the former s 27F apply for the purposes of s 83-175(1), much less that dicta from such authorities may be relied upon.[10] Paragraph 4 of TR 2009/2 is stated to apply “[u]nless specifically noted”. In paragraph 260, the contrast between the former s 27F and s 83-175(1), with only the latter referring to the employee’s position, is specifically noted. In view of the conclusion I have reached, it is not necessary to resolve whether paragraph 260, which appears in the “Explanation” section of the Ruling, but not in the “Legally Binding” section, relevantly qualifies paragraph 4.

63. More to the point, though, I am not persuaded that the applicant's threshold propositions - regarding the impact of the principal authority relating to s 27F, the Dibb case - should be accepted. It is against the backdrop of those propositions that the applicant emphasises that the repeal of the former s 27F of the ITAA 1936 and its replacement with s 83-175(1) of the ITAA 1997 were not intended to effect a change in the law, as the explanatory memorandum above indicates. It will be recalled that the main difference between the provisions is that, unlike s 27F, s 83-175(1) refers explicitly to the employee's position being redundant.

64. On the basis that no change was intended, the applicant sought to draw upon comments in Dibb, particularly paragraph [43] of the Full Court's judgement, extracted in full above, where the Court noted that:

[i]t is only if the employer considers that there is no available job for which the employee is suited, and that he or she must therefore be dismissed, that the question of redundancy arises.

65. From that reference, the applicant submitted that s 27F applied if the employee's job was no longer to be performed by any employee or there was no available job for which the employee was suited so that the employee was surplus to the employer's needs.

66. I have not found those submissions persuasive in relation to the construction of

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either s 27F or s 83-175(1). So far as s 83-175(1) is concerned, the extracts from Weeks above confirm, not surprisingly, that it is the wording of the current s 83-175(1) that must be construed and that it requires the relevant position to be redundant. The Tribunal, even if not formally bound to follow that construction emphasised by Full Court authority, would certainly do so.

67. In any case, and relevant to the question of reliance on TR 2009/2, the facts in Dibb are such that, on any view, Mr Dibb's position would be taken to be redundant under the current provision. The Full Court did not rely on Mr Dibb being surplus to the employer's requirements as a standalone alternative basis for the conclusion that s 27F applied. The Court's observations in that regard were in the context of explaining that, not surprisingly, the question of redundancy would only arise if there were no other suitable duties for the employee to carry out such that the employee would be surplus to requirements.

68. The Court did note that the circumstance that a job is no longer to be performed by any employee of the employer "may not be the only circumstance where it could be said that the employee becomes redundant". However, Mr Dibb's former position was not to be performed by any person; it no longer existed as the collection of duties for which Mr Dibb was formerly responsible. As the Court noted:

The job, described by reference to its duties as previously performed by Mr Dibb, ceased to exist. The employer no longer wished to have that job performed by anybody.[11] [2004] FCAFC 126 , [44].

69. The question of redundancy only arose because there was no other job for Mr Dibb to perform. But it is because the employer no longer wished to have his job performed by anybody that Mr Dibb was redundant. The Full Court's reasoning is not binding authority for any broader principle.

70. For these reasons, I would not accept that Mr Fidge is protected from liability on the basis of reliance upon TR 2009/2.

CONCLUSION

71. I have accepted that Mr Fidge has discharged the burden of proving the contested elements of s 83-175(1) are satisfied. It follows that the objection decision must be set aside and substituted with a decision allowing the objection in full.

APPENDIX 1: AGREED FACTS[12] Extracted from Applicant’s Statement of Facts Issues and Contentions as agreed in the Respondent’s Reply to the Applicant’s Statement of Facts Issues and Contentions.

1. The Australian Defence Force ( ADF ) consists of the Royal Australian Navy, the Australian Army and the Royal Australian Air Force: s 17 of the Defence Act 1903 (Cth) ( Defence Act ).

2. The Australian Army consists of: (a) the Chief of Army; (b) the Regular Army; and (c) the Army Reserve: s 19(1) of the Defence Act.

3. The Regular Army consists of: (a) officers appointed to, and soldiers enlisted in, the Regular Army; and (b) members of the Defence Force transferred to the Regular Army: s 19(2) of the Defence Act.

4. The Army Reserve consists of: (a) officers appointed to, and soldiers enlisted in, the Army Reserve; and (b) members of the Defence Force transferred to the Army Reserve: s 19(3) of the Defence Act.

5. Relevantly under subsection 4(1) of the Defence Act:

The Applicant's career as an officer in the Permanent Forces of the ADF

6. On 16 January 1987, at the age of 18 years, the Applicant ( Mr Fidge ) became a member of the Permanent Forces of the ADF, and in particular the Australian Army. Mr Fidge was appointed as an Officer Cadet, that being an 'officer' rank within the meaning of the Defence Act.

7. On 25 October 1990, Mr Fidge received a Queen's Commission in respect of his appointment, on and from 16 January 1987, as an officer of the Australian Army.

8. In his capacity as a member of the Permanent Forces of the ADF, Mr Fidge was bound to "render continuous full time service": s 23(1) of the Defence Act.

9. Mr Fidge rendered continuous full time service over the course of his career in the Permanent Forces of the ADF, and was promoted as follows:

The termination of Mr Fidge's service with the Permanent Forces of the ADF

10. At the time Mr Fidge joined the ADF, different officer ranks had different compulsory retirement ages pursuant to Regulation 124 of the then-operative Australian Military Regulations ( Military Regulations ) (which were replaced by the Defence Regulation 2016 ( Defence Regulations ) which commenced on 1 October 2016).

11. Under an amendment to Regulation 124 of the Military Regulations made in 1995, certain officers in the ADF were given an opportunity to make an election under Regulation 124 regarding their retirement age. Mr Fidge, who held the rank of Captain at that time and thus qualified to make an election, elected in writing on 12 October 1995 to serve to the age of 55 years (i.e. his final day of service would be 21 August 2023).

12. On 31 July 2018, Lieutenant General Richard M Burr, AO, DSC, MVO, the Chief of Army ( Chief of Army ) issued Mr Fidge with a letter ( Notice Letter ). The Notice Letter relevantly stated:

"The purpose of this letter is to advise that you are being considered for Command-Initiated Transfer to the Reserves (CITR).

…You have provided exemplary service to the Australian Regular Army throughout your service, which has spanned over 31 years, with seven years as a colonel.

Every effort is being made to find you further employment; however it is unlikely there will be a full-time position for you following your appointment as Defence Attaché-Ankara, International Policy"

(emphasis added).

13. The Commissioner contends and Mr Fidge agrees that in early February 2019, Mr Fidge completed his assignment as Defence Attaché Ankara.

14. During the period between February 2019 and 6 June 2019, Mr Fidge continued to render full time service as a member of the Permanent Forces. He was remunerated for that continuous full time service.

15. On 5 June 2019, the Chief of Army issued Mr Fidge with a letter ( Dismissal Letter ). The Dismissal Letter noted that the Chief of Army had decided to proceed with a Command - Initiated Transfer to the Reserves ( CITR ) in accordance with section 16 of the Defence Regulations. Relevantly, the Dismissal Letter stated:

"As advised in the Notice, you were identified for CITR as it was unlikely Army would be able to find you further full-time employment following your appointment as Defence Attaché Ankara. All efforts have been made to identify further employment, however, continued workforce planning deliberations have confirmed there will not be a full-time position available for you following your current role . As a result, and in accordance with Section 16 of the Defence Regulation 2016, I have determined that transfer to SERCAT 3 will occur on 07 June 2019. As you will be compulsorily transferred from the Permanent Force to the Reserves for reasons of workforce planning within 30 days of receipt of this decision , I advise that you are eligible for a

ATC 12028

special benefit payment pursuant to a determination under section 58B of the Defence Act 1903 "

(emphasisadded).

16. Relevantly, section 16 of the Defence Regulations is headed "Transfer between arms of the Defence Force" and relevantly provides:

"(1) The Chief of the Defence Force may transfer a member from the Permanent

Forces to the Reserves if the transfer is in the interests of the Defence Force .

Note: For interests of the Defence Force , see subsection 6(2)."

17. Subsection 6(2) of the Defence Regulations provides:

"Reasons for something being or not being in the interests of the Defence Force include reasons relating to one or more of the following:

…(d) workforce planning in the Defence Force…"

18. On 6 June 2019, Mr Fidge served his last day of continuous full time service as a member of the Permanent Forces of the ADF. At that time, Mr Fidge was 51 years old.

19. The "Separation Order 8214956 Col AC Fidge" relevantly provides:

20. On 7 June 2019, Mr Fidge was transferred to SERCAT 3 in the Reserves under subsection 16(1) of the Regulations.11 In his capacity as a member of the Reserves, Mr Fidge is bound to render service as required by the Chief of Defence Force: section 27 of the Defence Regulations.

21. On 7 June 2019 at 9:50am, Luke Stevens, Personnel Officer - Exits Team, Pay and Administration Branch ( Mr Stevens ), sent an email to Renee Corcoran, Assistant Senior Officer Manager - Army, Directorate of Officer Career Management - Army ( Ms Corcoran ) with heading "Separation Order 8214956 COL AC FIDGE". The email relevantly stated:

"Good morning,

I would like to clarify the members [sic] termination .

Under point 1 of the Separation Order it says the member is discharging under S16 of DR16 whilst also stating that the member is discharging as a C.I.T.R

Could you please confirm if the members termination is a C.I.T.R

Kind regards,

Luke Stevens

Personnel Officer - Exits Team …"

(emphasis added)

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22. On 7 June 2019 at 9:52am, Ms Corcoran responded to Mr Stevens' referred to at [21] above as follows:

"HI Luke,

Yes it is a CITR.

CITR falls under section 16 of the DR16 for workforce planning - refer to

MILPERSMAN Part 10 Chap 4 and PACMAN Vol 1 Chap 2 Part 3 Div 3.

Regards,

Renee

Renee Corcoran

23. On 13 June 2019, the Australian Defence Organisation (ABN 6806814312) paid Mr Fidge a net termination payment of $93,222.78, being a gross termination payment of $175,892.78 ( Termination Payment ) less $82,670.00 in tax withheld, as set out on the relevant "Pay Summary" issued in connection with the payment that day:

" Earnings

Description Date From … Current … Total Earnings

…

Severance Benefit Taxed 06/06/2019 175892.78 175892.78

Taxes

Description …. Current … Total Earnings

…

Tax on Non-Excluded ETP 82670.00 82670.00"

Mr Fidge's work in the Reserves

24. Since his transfer to the Reserves, Mr Fidge has undertaken the following work, all being in the nature of administrative support for the Commanding Officer of the Army Compliance and Assurance Unit:

PROCEDURAL BACKGROUND

25. On 31 October 2019, Mr Fidge lodged his income tax return for the 2019 income year. Mr Fidge returned the Termination Payment in his assessable income that year.16 Mr Fidge also disclosed in his income tax return that tax in the amount of $82,670 had been withheld from the Termination Payment.

26. On 11 November 2019, the Commissioner issued a notice of assessment to Mr Fidge under section 166 of the Income Tax Assessment Act 1936 ( 1936 Act ) for the 2019 income year as follows:


Income year Taxable income Result of notice
2019 $410,189 $940.00 payable 05.12.2019

27. Following a review of Mr Fidge's income tax return, on 29 November 2019, the Commissioner issued a notice of amended assessment to Mr Fidge under section 166 of the 1936 Act for the 2019 income year as follows:


Income year Taxable income Refund
2019 $410,189 $526.00

28. On 23 September 2021, Mr Fidge objected against the amended assessment for the 2019 income year referred to at [27] above.

29. On 9 December 2021, the Commissioner made an objection decision in respect of the objection referred to at [28] above. Relevantly, the Commissioner disallowed the objection in full in respect of the amended assessment for the 2019 income year.

30. On 29 December 2021, Mr Fidge lodged an application for review of the Commissioner's objection decision referred to at [29] above with the Administrative Appeals Tribunal ( AAT ).

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Footnotes

[1] The Commissioner accepts the other statutory eligibility criteria for concessional treatment of the payment are satisfied.
[2] [2004] FCAFC 126 .
[3] [2013] FCAFC 2 .
[4] The applicant has the burden of proving the relevant assessment is excessive: Taxation Administration Act 1953 (Cth), s 14ZZK.
[5] [2004] FCAFC 126 .
[6] [2013] FCAFC 2 .
[7] Respondent’s Written Outline of Submissions, [164].
[8] Transcript of proceedings, P-125, lines 1-3.
[9] Taxation Administration Act 1953 (Cth), s 357-60.
[10] Paragraph 4 of TR 2009/2 is stated to apply “[u]nless specifically noted”. In paragraph 260, the contrast between the former s 27F and s 83-175(1), with only the latter referring to the employee’s position, is specifically noted. In view of the conclusion I have reached, it is not necessary to resolve whether paragraph 260, which appears in the “Explanation” section of the Ruling, but not in the “Legally Binding” section, relevantly qualifies paragraph 4.
[11] [2004] FCAFC 126 , [44].
[12] Extracted from Applicant’s Statement of Facts Issues and Contentions as agreed in the Respondent’s Reply to the Applicant’s Statement of Facts Issues and Contentions.

 

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