Superannuation, retirement & employment termination: Eligible termination payment (ETP) used to acquire a business

Is taxation relief available to a taxpayer who uses their eligible termination payment (ETP) to acquire a business?

No. As none of the ETP was rolled over into a 'superannuation fund' or 'approved deposit fund', there is no taxation relief available to the taxpayer under the Income Tax Assessment Act 1936 (ITAA 1936).

The taxpayer had been retrenched and was paid an ETP. The taxpayer used the entire amount of the ETP to purchase a business. None of the ETP was rolled over into a superannuation fund or approved deposit fund.

The taxation of ETPs is prescribed by Subdivision AA of Division 2 of Part III of the ITAA 1936. An ETP can comprise a number of components which are taxed in varying ways. A taxpayer is only able to defer the payment of tax on some components of an ETP if the ETP has been rolled over in accordance with section 27D of the ITAA 1936. If the ETP has not been rolled over there is no other provision in the ITAA 1936 that would allow taxation relief to the taxpayer in respect of the ETP. Accordingly, as no taxation relief is available in respect of the ETP the taxpayer was required to include in assessable income those components of the ETP as calculated under sections 27B of the ITAA 1936 and section 27C of the ITAA 1936.