A taxpayer who lived in various countries, including Australia, while he was managing director of a company, and who received an ETP of over $300,000 when his role as the managing director was terminated in 2007, has been found by the AAT to be assessable on the majority of the ETP as the AAT considered he was a resident of Australia when the ETP was paid to him.
However, the AAT found that he was not assessable on part of the annual and long service leave components of the ETP in view of the application of the exemption in s 23AG of the ITAA 1936 for foreign income derived by a resident engaged in foreign service for a continuous period of not less than 91 days.
The ETP consisted of 3 components: annual leave and long service leave, a taxable component of a redundancy payment and a non-taxable component of the redundancy payment. In view of the AAT’s finding on the taxpayer’s residency, it found there was no issue about the exclusion of the non-taxable redundancy payment, nor the assessability of the taxable component of the redundancy payment (as it was not an exempt non-resident foreign termination payment).
However, the AAT found that the taxpayer was not assessable on that part of the component of the ETP for unused annual and long service leave to which the exemption in s 23AG(1) applied.
Accordingly, the AAT concluded that while the exempt part of that payment had to be taken into account in determining the tax rate applicable to the taxpayer’s remaining assessable income for the 2007 income year, only a portion of the payment for annual and long service leave (ie $21,000) was assessable to him while the remaining amount (ie $91,000) had to be excluded from his assessable income for the 2007 income year.
(AAT Case [2013] AATA 494, Re Boyd and FCT, AAT, Fice SM, AAT Ref: 2012/2178, 12 July 2013.)
[LTN 134, 15/7/13]