VGDW and Commissioner of Taxation (Taxation)

The Administrative Appeals Tribunal considered the dispute between VGDW (the applicant) and the Commissioner of Taxation concerning the tax treatment of payments made to the applicant following the termination of their employment.

The Tribunal was required to determine whether a discretionary sum paid to the applicant after their employment ceased was made "in consequence of" that termination for the purposes of individual income tax. The Tribunal also considered whether the applicant's position was genuinely redundant.

Deputy President Bernard J McCabe P found that there was a sufficient causal connection between the termination of employment and the lump sum payment. His Honour reasoned that while the payment was calculated by reference to a formula that mirrored what would have been paid as salary, there was no contractual obligation to pay this amount once termination occurred. The payment was therefore referable to the termination clause of the contract, making the termination the occasion for the payment, not merely a temporal coincidence. The Tribunal distinguished this payment from base salary paid prior to termination, which was clearly referable to the employment itself.

The Tribunal set aside the objection decision and remitted the matter to the Commissioner for reconsideration, concluding that the amount of $18,202.96 paid on 12 July 2017 was made in consequence of the termination of employment and that the applicant's position was genuinely redundant.