Transitional termination payments

Are employment termination payments made under a workplace agreement, entered into after 10 May 2006, transitional termination payments, if the terms under which the payments are made are the same as the terms under a workplace agreement in place just before 10 May 2006?

No. Employment termination payments made under a workplace agreement, entered into after 10 May 2006, are not transitional termination payments, even if the terms under which the payments are made are the same as the terms under a workplace agreement in place just before 10 May 2006.

An employee is covered by a workplace agreement within the meaning of the Workplace Relations Act 1996 .

There was an agreement in place just before 10 May 2006.

However, a new agreement was entered into after 10 May 2006. This new agreement replaced the agreement that was in force just before 10 May 2006.

The agreements are identical in providing for the making of payments in lieu of notice.

Under the new agreement and within 12 months of employment termination, the employee receives a payment in lieu of notice before 1 July 2012.

Under subsection 82-10(1) of the Income Tax (Transitional Provisions) Act 1997 (ITTPA) a life benefit termination payment received on or after 1 July 2007 is a transitional termination payment in the following circumstances: • the payment is received by a person because the person is entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law or a workplace agreement within the meaning of the Workplace Relations Act, and • the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006.

Under section 82-130 of the Income Tax Assessment Act 1997 , a life benefit termination payment is an employment termination payment received by a person in consequence of the termination of that person's employment. The payment normally has to be received within 12 months of the termination.

The payment in lieu of notice received within 12 months of the termination of employment qualifies as an employment termination payment.

Notwithstanding the entitlements are the same under both the agreement in force just before 10 May 2006 and the new agreement entered into after 10 May 2006, the life benefit termination payment was paid under the relevant provisions of the new agreement that was first entered into on or after 10 May 2006.

Hence, as the payment was not made under an agreement in force just before 10 May 2006 it is not a transitional termination payment.