Superannuation, retirement and employment termination: Eligible termination payments (ETPs). Bona fide redundancy. Ex-gratia payment to casual employee.

Is an ex-gratia payment received in place of a redundancy and severance package by a casual employee, whose position has been made redundant, a bona fide redundancy payment?

The ex-gratia payment is an eligible termination payment received in consequence of being dismissed because of bona fide redundancy.

The taxpayer works for a business as a permanent employee. In anticipation of changing jobs, the taxpayer requests to be reclassified as a casual employee. Following reclassification, the taxpayer continues to perform the same duties and work the same number of hours. The taxpayer's employer terminates the employment of all its employees because the operation of the business had been contracted out to another organisation. All the permanent employees receive a redundancy and severance package. Following union intervention, the taxpayer receives an ex-gratia payment from the employer equal to the redundancy and severance packages received by the permanent employees whose positions had been made redundant.

An employee's position is redundant if the employer decides they no longer wish the job the employee has been doing to be done by anyone, the decision is not due to the ordinary and customary turnover of labour, the decision leads to the termination of the employee's employment, and the termination of employment is not on account of any personal act or default of the employee.

The employer contracted the work done by the employee to another organisation. The position and work carried on by the employee no longer exists. Accordingly, the position was terminated due to bona fide redundancy. Note: The above analysis will only apply to payments made before 1 July 2007 as section 27F of the ITAA 1936 which relates to bona fide redundancy payments in the ITAA 1936 have been repealed by the Superannuation Legislation Amendment (Simplification) Act 2007 .