The AAT has decided that a payment made to the taxpayer, in settlement of a court case against his former employer, was not for loss of earning capacity but only for loss of earnings and was an ‘eligible termination payment’.
See below for further details.
The facts were these.
- The taxpayer was a chartered accountant who, in October 2000 at the age of 55, accepted a job offer from C Co.
- However, E Co also offered him a position and he decided to accept E Co’s offer instead.
- Unfortunately, his experience with E Co was not a happy one and after about 13 months his employment was terminated.
- The taxpayer sued E Co and eventually accepted a lump sum payment in settlement of his claim.
- In the meantime, he had many unsuccessful attempts to secure employment.
The AAT decided that the payment was received in consequence of the termination of the taxpayer’s employment and thus an employment termination payment (ETP) as defined in s 82-130 ITAA 1997.
- The payment was clearly received in settlement of the taxpayer’s court proceedings and that was sufficient for the payment to be characterised as an ETP.
- The payment was not, as contended by the taxpayer, compensation for the destruction of his earning capacity.
(Stark v CofT [2021] AATA 2583, AAT, Olding SM, 29 July 2021.)
[LTN 146, 2/8/21]