A taxpayer has been unsuccessful before the AAT in a matter concerning a lump sum payment received in the 2011 income year following the settlement of an employment dispute.
- The taxpayer worked as a senior manager at St George Bank from 1988, and later with Westpac, until the termination of his employment in August 2009.
- In October 2009, the taxpayer commenced legal proceedings in the Federal Court against Westpac.
- Part of the taxpayer’s claim in relation to a 2008-09 year bonus was resolved in November 2010, and the balance of the proceedings, was settled by deed of release dated 3 May 2011. [All in the same 2010-11 financial year.]
- Under the terms of the deed, Westpac agreed to pay the taxpayer id=”mce_marker”,937,000.
- In his tax return for the 2011 income year, the taxpayer declared 3 amounts as payments having been received by him from Westpac, being $597,547 (representing the 2008-09 bonus with interest) and $969,230 and $967,770, which was the total of the settlement proceeds paid by Westpac in May 2011.
The AAT said how these latter amounts were calculated and how the lump sum settlement proceeds paid in May 2011 should be characterised was key to the dispute.
The issue in dispute was whether the amount of $969,230 (reduced to $929,066 before the AAT) was a “transitional termination payment” for the purposes of Div 82 of the Income Tax (Transitional Provisions) Act 1997 (ITTPA). The taxpayer contended that while this amount comprised part of the total settlement proceeds paid in May 2011, it was referrable to a redundancy entitlement that was in place as at 9 May 2006, and that he was therefore entitled to concessional tax treatment.
The AAT was not satisfied the assessment for the 2011 income year was excessive. Having regard to the relevant authorities and the facts before it, the AAT was not satisfied the taxpayer received $929,066, which was said to comprise part of the lump sum settlement paid in May 2011, as a transitional termination payment within the meaning of s 82-10 of the ITTPA.
(AAT Case [2014] AATA 535, Re CDPJ and FCT, AAT, Ref No: 2013/5029, Redfern SM, 5 August 2014.)
[LTN 150, 6/8/14]