Superannuation, retirement and employment termination: Eligible termination payment (ETP) paid to Director.

Is the payment of a golden handshake in consideration of past service as a director of a company treated as an eligible termination payment?

Yes - the golden handshake is an ETP under the paragraph (a) definition in subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

The company intends to pay the retiring directors a golden handshake in recognition of their service as directors.

Eligible termination payment is defined in subsection 27A(1) of the ITAA 1936. The definition states in part: ' eligible termination payment in relation to a taxpayer, means (a) any payment made in respect of the taxpayer in consequence of the termination of any employment of the taxpayer other than a payment ...'

The above definition shows that an ETP can be in relation to the termination of any employment of the taxpayer. Therefore, it must be considered whether the directorship of a company meets the definition of employment.

Employment is defined in subsection 27A(1) as: ' employment includes the holding of an office;'

Being a director is the holding of an office. As such, under subsection 27A(1) of the ITAA 1936 the termination of a directorship is a termination of employment.

A golden handshake paid to a director of a company can meet the paragraph (a) definition of an ETP.