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Section 159SA of the ITAA allows a rebate (relevant rebate) for annual leave, long service leave and eligible termination payments (LSP/ETP) where the taxpayer's applicable rate of tax is greater than the amount specified in the tables under section 159SB of the ITAA.

The applicable rate of tax, in most circumstances, is the general rate of tax under subsection 12(1) of the ITRA. If the taxpayer is a primary producer (PP) subject to the averaging provisions under section 156(4) and section 156(4A) of the ITAA, the applicable rate of tax is the notional rate under subsection 12(2) and subsection 12(3) of the ITRA.

The relevant rebate calculation for a primary producer (A*) is different to that of a non-primary producer (B*). The primary production averaging calculation is directly affected by the inclusion of a LSP/ETP amount in taxable income. This effect is offset by the relevant rebate calculation incorporating the notional rates.

Therefore, use of the notional rate (PP) instead of the general rate ensures that the relevant rebate is reduced by the same amount as the average rebate is increased. Alternatively, the relevant rebate will also reduce proportionately to a complementary tax reduction.

The example on page 2 of this taxation determination illustrates the correct method of calculating the relevant rebate for a primary producer.