Issue
Is the payment in lieu of unused annual leave 'eligible assessable income' under section 159SA of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
The payment is not a payment under section 26AC of the ITAA 1936 as there was no termination of an office or employment.
Facts
The taxpayer's employer was taken over by another entity in 1990. The taxpayer's employment was not terminated. In 1996 a payment was made in respect of unused annual leave. The payment was calculated as at 31 December 1994.
Reasons for Decision
Section 159SA of the ITAA 1936 allows a rebate to ensure that 'eligible assessable income' is taxed at specified maximum rates of tax. 'Eligible assessable income' is defined in section 159S of the ITAA 1936 to include amounts assessable under section 26AC of the ITAA 1936 that accrued in respect of service before 18 August 1993.
Section 26AC of the ITAA 1936 applies to any lump sum payment made after 15 August 1978 that is paid for unused annual leave and is paid in consequence of the termination or retirement from any office or employment.
When the taxpayer's employer was taken over by another entity the taxpayer's employment was not terminated.