XRXR and Commissioner of Taxation (Taxation and business)

[2025] ARTA 357

XRXR and Commissioner of Taxation (Taxation and business) [2025] ARTA 357 (9 April 2025)

Applicant:XRXR

Respondent:  Commissioner of Taxation

Tribunal Number:                2024/6857

Tribunal:General Member J Dunne   

Place:Melbourne

Date:9 April 2025

Decision:The Tribunal affirms the decision under review.

...................................[SGD]...................................

General Member J Dunne

Catchwords

TAXATION – Settlement of dispute under Fair Work Act 2009 (Cth) – Employment termination payment – Private binding ruling objected to – Whether payment was an excluded payment under paragraph 82-10(6)(d) of the Income Tax Assessment Act 1997 (Cth) – Impact of nature of claims filed under the Fair Work Act 2009 (Cth) – Meaning of “principally” – Nature of grounds of objection – Finding that burden of proof not satisfied

TAXATION – Review of objection to a private binding ruling – Constraints on Administrative Review Tribunal on review of a private ruling – Procedural issues from the existence of an assessment and a private ruling – Nature of a private ruling focusing on arrangement described by a ruling applicant – Whether scheme of private ruling includes Applicant’s evidence – Effect of references to documents in private ruling – Nature of a “contentions” section in a private ruling – Concerns about the form of the private ruling

Legislation

Acts Interpretation Act 1901 (Cth) ss15AA, 15AB

Administrative Review Tribunal (Consequential and Transitional Provisions No.1) Act 2024 (Cth)

Anti-Discrimination Act 1991 (Qld) s 7.

Fair Work Act 2009 (Cth) Part 2-2, ss 14, 117, 340, 343, 344, 382

Income Tax Assessment Act 1997 (Cth) ss 82-10, 82-130, 82-140, 995-1

Income Tax Assessment (1997 Act) Regulations 2021 (Cth)

Taxation Administration Act 1953 (Cth) ss 14ZVA, 14ZZK, Schedule 1 ss 357-105, 357-110, 357-115, 357-120, 359-5, 359-20, 359-60, 359-65

Cases

Allen v Federal Commissioner of Taxation [2021] AATA 2768

Baya Casal v Deputy Commissioner of Taxation [2025] FCA 87

Bellinz Pty Ltd v Commissioner of Taxation (1998) 84 FCR 154

Case 5/2014 [2014] AATA 535

Case 7/2010 [2010] AATA 912

CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384

Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24

Co-operative Bulk Handling Ltd v Commissioner of Taxation [2010] FCA 508

Commissioner of Taxation v Co-operative Bulk Handling Ltd [2010] FCAFC 155

Commissioner of Taxation v Eichmann [2019] FCA 2155

Commissioner of Taxation v Reef Networks Pty Ltd [2004] FCAFC 275

Delacy v Federal Commissioner of Taxation [2006] AATA 198

Dibb v Federal Commissioner of Taxation [2004] FCAFC 126

Eichmann v Commissioner of Taxation [2020] FCAFC 155

Federal Commissioner of Taxation v McMahon 97 ATC 4986

Federal Commissioner of Taxation v Word Investments Ltd [2008] HCA 55

Gerald Cassegrain & Co Pty Ltd v Federal Commissioner of Taxation [2007] FCA 415

Hall v Federal Commissioner of Taxation [2006] AATA 360

Harley v Aristocrat Technologies Australia Pty Ltd [2010] FWA 62

Hill v Minister for Local Government, Territories and Roads [2004] AIRC 394

Kort v Federal Commissioner of Taxation [2019] AATA 336

Le Grand v Commissioner of Taxation [2002] FCA 1258

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Limited [2015] HCA 37

National Speakers Association of Australia Inc v Federal Commissioner of Taxation [1997] FCA 1371

Pierce v Federal Commissioner of Taxation 98 ATC 2240

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Re Cooper Bros Holdings Pty Ltd trading as Triple Waste Management and Commissioner of Taxation [2013] AATA 99

Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231

Senior and Commissioner of Taxation [2015] AATA 353

Sladden v Commissioner of Taxation [2024] FCAFC 122

SSAU Nominees Pty Ltd v Federal Commissioner of Taxation 85 ATC 4632

State of Victoria v McKenna [1999] VSC 310

Stark v Federal Commissioner of Taxation [2023] FCA 1523

TBCL and Commissioner of Taxation [2016] AATA 264

The Public Servant and Commissioner of Taxation [2014] AATA 247

Toowoomba Regional Council v Federal Commissioner of Taxation [2025] FCA 161

Yip v Federal Commissioner of Taxation [2011] AATA 785

Secondary Materials

Australian Taxation Office Taxation Ruling TR 2003/13 Income tax: employment termination payments (ETP): payments made in consequence of the termination of any employment: meaning of the phrase ‘in consequence of’

Australian Taxation Office Practice Statement Law Administration PS LA 2003/7 How to treat a request to lodge a late objection

Australian Taxation Office Private Ruling PBR 1052238153125

Macquarie Dictionary (online edition as of 1 April 2025, Macquarie Dictionary Publishers, an imprint of Pan McMillan Australia Pty Ltd).

National Employment Standards: and align="left">Private ruling application form: align="left">Taxation Laws Amendment (Self Assessment) Bill 1992 (Cth), Explanatory Memorandum

Tax Laws Amendment (2012 Measures No.3) Bill 2012 (Cth), Revised Explanatory Memorandum

Tax Laws (Improvements to Self Assessment) Bill (No.2) 2005 (Cth), Explanatory Memorandum

Statement of Reasons

ISSUES

1. This case is about the tax treatment of two payments totalling $259,000 (“the payment”) derived by the Applicant from his former employer (“the Employer”) in the 2024 income year.

2. The question was considered in a private ruling issued by the Commissioner to the Applicant on 8 April 2024 (“second private ruling”). The issue before the Tribunal is whether the Commissioner was correct in ruling that the payment was not in whole or in part an excluded payment (“excluded payment“) pursuant to paragraph 82-10(6)(d) of the Income Tax Assessment Act 1997 (Cth) (“ITAA 1997”).

3. The following issues are required to be considered by the Tribunal:

   (a)Preliminary issues which relate to the Commissioner’s revelation at the hearing that the Applicant had both an assessment and a private ruling in place for the 2024 year. These issues were required to be considered because of the issue noted below about the ability for the Tribunal to consider the Applicant’s evidence.

   (b)Whether all of the Applicant’s evidence at the hearing and before the Tribunal can be taken into account by the Tribunal when reviewing the second private ruling. Particularly, whether the Applicant’s evidence is outlined in the scheme of the second private ruling.

   (c)Whether the Applicant has met his burden of proof in demonstrating that the second private ruling is incorrect in whole or in part. That is, whether the Applicant has demonstrated that the payment was in whole or part an excluded payment under paragraph 82-10(6)(d) of the ITAA 1997.

4. For the reasons outlined in detail below, I have concluded that:

   (a)The interim procedural issues do not need to be determined as a result of the Applicant deciding to pursue these proceedings against the second private ruling and not to object to the assessment at this stage. I make some observations in these reasons about those procedural issues and about the Commissioner’s position before the Tribunal.

   (b)The majority of the Applicant’s evidence is outlined in the scheme of the second private ruling. The form of the second private ruling is commented on below. Concerns about the form of the second private ruling are considered, but they do not invalidate the second private ruling. Critical aspects of the Applicant’s evidence are not in the scheme of the second private ruling and cannot be considered by the Tribunal on review of the second private ruling.

   (c)The matters that are not in the scheme of the private ruling are critical to the Applicant’s case. Because those matters are not in the private ruling scheme and because of the constraints on the Tribunal’s review of the second private ruling, the Tribunal cannot be satisfied that the payment is principally for matters set out in paragraph 82-10(6)(d) of the ITAA 1997. In particular, evidence relating to the Applicant’s employment contract and the period of notice required on termination of the Applicant’s employment and evidence about the events surrounding the signing of the Deed of Release are not set out in the scheme of the second private ruling.

   (d)The Applicant may consider objecting to the assessment setting out all of the facts and arguments that have not been able to be considered in this case because of his decision to object to the second private ruling. That is for the Applicant to determine.

   OVERVIEW OF THE RELEVANT STATUTORY PROVISIONS

   Rulings regime

5. The existing case law has analysed the rulings regime and the related objections regime in detail.[1] I adopt that analysis. My comments below are in brief.

   [1] For instance, FC of T v McMahon 97 ATC 4986, 4988. The Public Servant and Commissioner of Taxation [2014] AATA 247, [42]-[45].

6. The private rulings regime is set out in Division 357 and Division 359 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (“TAA”). Private rulings as to how a taxation law applies or would apply to a specified scheme and specified taxpayer are binding on the Commissioner. The Commissioner may seek or be provided additional information by the taxpayer and may take that into account in issuing the private ruling.[2]  Assumptions can also be specified in a private ruling.[3]

   [2] Sections 357-105 and 357-115 of Schedule 1 to the TAA.

   [3] Section 357-110 of Schedule 1 to the TAA.

7. When objecting to a private ruling there are also specific rules. For example, section 359-60 of Schedule 1 to the TAA provides for the ability to object against a private ruling other than in specified circumstances (which include where there is an assessment in the year to which the ruling relates). Section 359-65 of Schedule 1 to the TAA is also relevant and is considered further below.

8. In this application for review before the Tribunal, the Applicant has the burden of proving that the second private ruling should not have been made or should have been made differently.[4]

   [4] Section 14ZZK of the TAA.

   The employment termination payment (“ETP”) rules and excluded payments

9. The application of the ETP rules and paragraph 82-10(6)(d) of the ITAA 1997 can also be summarised briefly.

10. The ETP rules bring to tax amounts derived on termination of employment. An ETP is also a “life benefit termination payment” in accordance with section 82-130 of the ITAA 1997.

11. An element of an ETP may be tax free depending on the circumstances.[5] After that element is taken into account, for the remainder of an ETP there is, by way of  tax offset, a concessional tax rate imposed on such payments up to a certain cap.[6] Above that cap, the top marginal tax rate applies. Excluded payments are taxed at concessional rates.[7]

    [5] Section 82-140 of the ITAA 1997.

    [6] Subsection 82-10(4) of the ITAA 1997 provides that it is the lesser of two caps (following determining each element of the ETP). Section 82-160 provides that the whole-of-income cap is $180,000. The ETP cap amount in indexed annually and for the 2023-24 year it is $235,000.

    [7] Subsection 82-10(6) of the ITAA 1997.

12. The Applicant’s case is that the ETP cap of $235,000 should be applied to the payment because it was an excluded payment. The Commissioner applied the $180,000 whole-of-income cap on the basis that the payment at issue was not an excluded payment in whole or part. The Applicant says this resulted in the Applicant paying more tax than the Applicant believes he should have.

13. The relevant statutory provision at issue in this case is section 82-10 of the ITAA 1997, particularly paragraph 82-10(6)(d). The relevant parts of section 82-10 read as follows:

    (1)  The *tax free component of a *life benefit termination payment you receive is not assessable income and is not*exempt income.

    (2)  The* taxable component of the payment is assessable income.

    (3)  You are entitled to a * tax offset that ensures that the rate of income tax on the amount mentioned in subsection (4) does not exceed:

    (a)  if you are your * preservation age or older on the last day of the income year in which you receive the payment--15%; or

    (b)  otherwise--30%.

    (4)  The amount is so much of the * taxable component of the payment as does not exceed the smallest of the following: [….]

    (c)  if the payment is not an excluded payment--$180,000, reduced (but not below zero) by your taxable income for the income year in which the payment is made. [……]

    (6)  Paragraph (4)(c) does not apply in relation to * life benefit termination payments: [….]

    (d)  that:

    (i)  are paid in connection with a genuine dispute; and

    (ii)  are principally compensation for personal injury, unfair dismissal, harassment, discrimination or a matter prescribed by the regulations; and

    (iii)  exceed the amount that could, at the time of the termination of your employment, reasonably be expected to be received by you in consequence of the voluntary termination of your employment.

    FACTUAL BACKGROUND

    Two private rulings

14. The Commissioner issued two private rulings to the Applicant pursuant to Division 359 of Schedule 1 to the TAA.

15. The first ruling was issued on 15 November 2023[8] (“the first ruling”) and ruled that the payment was an “employment termination payment” as defined in section 995-1 and section 82-130 of the ITAA 1997.

    [8] T6.

16. The Applicant objected to the first ruling on 15 January 2024[9] because it had not dealt with all of the issues that he sought a ruling about. In particular, it had not considered whether the payment was an excluded payment. That objection was later withdrawn on the basis that the first ruling would be revisited.[10]

    [9] The Tribunal notes that the Respondent’s Statement of Facts, Issues and Contentions dated 22 October 2024 (“Commissioner’s SFIC”) [32], and the Closing Submissions of the Respondent dated 14 March 2025 (“Commissioner’s Closing Submissions”) [2] state there was no objection to this ruling. That is not correct, and this was raised by the Applicant in the Applicant’s Statement of Facts, Issues and Contentions dated 29 October 2024 (“Applicant’s SFIC”) 3, [83] many months prior to the Commissioner’s Closing Submissions.

    [10] Applicant’s SFIC 3.

17. The second private ruling was issued on 8 April 2024[11] and ruled that no part of the payment was an excluded payment. Prior to the second private ruling being issued, the Commissioner did not put the draft factual scheme in the second private ruling to the Applicant for comment.[12]

    [11] T8. Published in redacted form on as Edited version of private advice – Authorisation Number 1052238153125.

    [12] Transcript, 9 [20]-[31]. This is considered further below.

18. The reasons outlined for the ruling were that:

    (a)The wording in the Deed of Release reflects it is the “entire Agreement” and “supersedes all earlier representations and conduct.”

    (b)The Deed of Release says it is “without admission to liability.”

    (c)The Deed of Release states that the payment is an ETP for tax purposes and is “in lieu of notice.”

    (d)By executing the Deed of Release, the Applicant agreed to terminate his employment voluntarily in exchange for receiving the payment.

    (e)The Deed of Release also contains a number of warranties, one of which states that the Applicant was “given the opportunity to take legal advice, as to the nature, effect and extent of this deed.”

    (f)The Deed of Release is a legal document. The Applicant could have exercised his right to refuse to sign it without legal representation.

    (g)In summary, the executed Deed of Release does not support the Applicant’s claim that the relevant payments are principally compensation for “personal injury, unfair dismissal, harassment, discrimination or a matter prescribed by the regulations” as required by paragraph 82-10(6)(d).

19. The Applicant objected to the second private ruling on 22 April 2024,[13] and the Commissioner disallowed that objection on 4 September 2024.[14]

    [13] T10.

    [14] T2, T12. Applicant’s SFIC [27], [30], [31], [32], [34], [35], [39], [40], [41], [53]. 

20. The Applicant’s objection[15] and application for review[16] each took the position that the Commissioner had placed inappropriate weight on the wording of the Deed of Release in the second private ruling. The Applicant’s objection was based on the ground that paragraph 82-10(6)(d) of the ITAA 1997 was applicable, focusing on harassment and discrimination. The Applicant also questioned why the Applicant would receive the payment and said it must be to settle his claims.[17]  

    [15] T10.

    [16] T1.

    [17] T10, 156 [20]-[23].

21. On 5 September 2024, the Applicant filed proceedings in this Tribunal[18] seeking a review of the Commissioner’s decision in the second private ruling.

    [18] T1. On 14 October 2024, the Administrative Appeals Tribunal became the Administrative Review Tribunal. Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 proceedings that were not finalised before 14 October 2024 are continued and finalised by the Administrative Review Tribunal. Anything done in relation to any such proceeding before 14 October 2024 is taken to have been done by the Administrative Review Tribunal.  

    Background to the payment

22. The Applicant had a senior position as an employee with the Employer, a company operated from offshore. The Applicant was also a director of the Employer and Australian subsidiaries of the Employer (including X Pty Ltd, the main Australian entity). The Applicant’s evidence was that he had no employment contract with the Employer.[19] The Applicant’s evidence was that only two weeks’ notice was required to terminate him for breaching his obligations.[20] The Applicant worked for a considerable period with the Employer.

    [19] Applicant’s SFIC [5]. T4, 75. T5, 81-82.

    [20] Transcript 5, 28-41. T9, 148. T5, 82 is the Applicant’s advice to the Commissioner before the issue of the second private ruling.

23. Following the death of the founder of the Employer, a difference of view arose between the Applicant and senior personnel and fellow directors of the Employer about the pricing of the Employer’s products in Australia when acquired by the Employer’s Australian subsidiaries. The Employer’s products were obtained by X Pty Ltd and any other Australian group companies from associated entities before being sold to clients. The difference of view between the Employer and the Applicant was about the steps the Employer and its related parties should take to ensure that the transfer pricing provisions in Australia’s taxation laws were not breached. The Applicant was concerned the Employer was not complying appropriately with those rules.

24. A number of exchanges occurred between the Applicant and the Employer on this topic from the middle of 2022 to the middle of 2023. The Applicant felt the Employer was breaching the transfer pricing laws and needed to adopt different processes.[21] The relevant people involved in those exchanges became entrenched in their respective views.

    [21] Transcript 15, [39].

25. During this period, an array of measures were taken by the Employer which the Applicant said isolated him in the workplace, including excluding him from meetings, and other actions which the Applicant felt undermined him.[22] The Applicant said he thought he would stay on, resolve matters and continue to try and improve the Employer’s procedures in relation to the transfer pricing rules.[23] The Applicant persisted in giving the Employer information about the transfer pricing rules.

    [22] Applicant’s SFIC [26]-[29]. Transcript 16 [25]-[45], 17 [42].

    [23] Applicant’s SFIC [29].

26. In December 2022, the Applicant was instructed by the Employer to rehire a former employee (“Mr A”) in the Australian business. Mr A had not been involved in the business for around 10 years and the Applicant’s evidence was that Mr A had been previously dismissed for poor performance.[24] The Applicant nevertheless followed the Employer’s instruction and reappointed Mr A.

    [24] Applicant’s SFIC [33]. Transcript 19, [45]-47].

1. As discussions on the transfer pricing issues continued into 2023, dissatisfaction between the Applicant and the Employer grew. Over time, the Employer took further steps such as critiques of the Applicant in meetings in his and others’ presence, critiques of his team and performance, and meetings he was excluded from where various responsibilities he had were reallocated.[25] At the end of May 2023, the actions also included requests for the Applicant to resign.[26] The Applicant raised all of these issues with the Employer stating there was no valid reason for dismissal nor for him to resign. The Applicant’s calls with the Employer started not being returned.[27] The Applicant had not been dismissed.

   [25] Applicant’s SFIC [27], [29], [31]-[33], [35], [36]-[38], [40]-[42]. Transcript 18, [43] and following.

   [26] Transcript 18, [27]-[41]; Applicant’s SFIC [37]-[39].

   [27] Transcript 16, [20]-[45], 17, [1]-[47]. Applicant’s SFIC [37], [39].

2. The Applicant became further concerned when his fellow directors of the Australian subsidiaries resigned, leaving him as sole director of those companies.[28] He did not know why this occurred. He was worried about his potential liability exposure.

   [28] Applicant’s SFIC [34], [42]-[51]. Transcript 17 [46]-[47], 18 [1]-[5].

3. The Applicant continued to raise the transfer pricing issues following the resignation of his co-directors. He also took steps in relation to the transfer pricing issues which included seeking advice and advising the Commissioner and ASIC of the transfer pricing issues.[29] The steps taken by the Applicant were considered by the Employer to be inappropriate and were alleged to include breaching confidentiality.[30] The Applicant took a different view, and felt he was meeting his duties as a director.

   [29] Applicant’s SFIC [43]-[51]. Transcript 15, [43], 19 [23]-[33].

   [30] Applicant’s SFIC [60].

4. On 11 June 2023, the Applicant filed a General Protections Application Not Involving Dismissal under section 340 of the Fair Work Act 2009 (Cth) (“FWA”) at the Fair Work Commission. The Applicant claimed there was coercion, undue influence, and pressure from the Employer in relation to a workplace right under sections 343 and 344 of the FWA.[31] 

   [31] This is reflected in the Applicant’s filing at the Fair Work Commission, T3 39-40, T3, 33-44.

5. The Applicant also said that his Fair Work Commission action was to restrain the Employer from breaching transfer pricing laws.[32] It is difficult to see how the Fair Work Commission could make such an order, as dealing with and preventing breaches of the taxation laws is for the Commissioner. The Tribunal understands that the point made by the Applicant is that his focus at that time was on remaining in his role with the Employer and resolving the taxation issues and risks he thought arose for the ongoing business.[33]

   [32] Applicant’s SFIC 2. Transcript 16, [19]-[23].

   [33] Applicant’s SFIC [29].

6. Around this time, the Applicant says the Employer took other actions against him. This included comments by the Employer to clients and colleagues that the Applicant would be leaving the company soon or had been replaced.[34] In addition Mr A started carrying out some of the Applicant’s duties.[35] On 15 June 2023 the Applicant heard from others at work that the Employer had instructed Mr A not to allow the Applicant into the office.[36] The Applicant said he felt his reputation was being damaged.

   [34] Applicant’s SFIC [37]. Transcript 19, [1]-[12], [46].

   [35] Applicant’s SFIC [66].

   [36] Applicant’s SFIC [56].

7. Further information was provided by the Applicant to the Fair Work Commission on 18 June 2023.[37] The Tribunal has not been able to review that further evidence as it is redacted on the Tribunal’s copy. The Tribunal was told this was because of confidentiality obligations imposed on the Applicant. The Applicant said that this letter involved explaining the steps he had undertaken in relation to the transfer pricing matters as well as the events after the time he filed his claim under the FWA which he said comprised harassment or discrimination.[38] 

   [37] Applicant’s SFIC, 2.

   [38] Transcript 16, [19]-[22], Applicant Submissions dated 18 September 2024 (“Applicant’s September Submissions”) 2.

8. On 20 June 2023 the Applicant was notified in writing by the Employer’s lawyer that he had been removed from his director positions, his official phone and email access had been removed, he was on special leave, he was under investigation and he was directed not to contact staff or clients, and not to attend the business premises.[39] Other staff of the Employer were also advised not to contact the Applicant and were required to sign documentation saying that no such contact would be made.[40]  Mr A was appointed as director and to the Applicant’s senior role, although the Applicant had not been dismissed.  Mr A advised customers he had replaced the Applicant.[41]

   [39] T3, 49-51; Applicant’s September Submissions 2, 17 [8]-[9], Applicant’s SFIC [56], [59], [60], [64]. Transcript 18, [43]-[47].

   [40] Applicant’s SFIC 2, Written Statement of Applicant’s former Colleague, 2.

   [41] Applicant’s SFIC [66]. Transcript 19 [45]-[47], 20 [1]-[6].

9. The Employer responded to the Applicant’s 11 June 2023 FWA action on 21 June 2023, denying adverse action had been taken and challenging other aspects of the Applicant’s FWA action including claiming that there was no ‘workplace right’ as required by sections 343 and 344 of the FWA. [42]

   [42] T3, 52-60. Applicant’s SFIC [61].

10. The Applicant responded to the Employer’s 20 June 2023 notification by letter dated 23 June 2023.[43]  In that letter, among other matters countering the Employer’s letter, the Applicant set out his view that he had not acted contrary to the interests of the Employer nor any of the subsidiary companies of which he was a director.

    [43] T3, 45-48. Applicant’s SFIC [63]. T7, 131.

    The Deed of Release and the payment

11. A conciliation conference was held before the Fair Work Commission on 26 June 2023.

12. At that conciliation conference the Applicant and the Employer were spoken to separately by the Fair Work Commission. The Applicant says he outlined the facts to the Fair Work Commission including specifically “the humiliation, the discrimination and the harassment [he] was subjected to.”[44]

    [44] Applicant’s SFIC [70].

13. On 29 June 2023, the Applicant and the Employer agreed to a settlement.

14. In his evidence before the Tribunal, the Applicant described the circumstances for him at the time as very difficult.[45] He said that he had been substantively replaced at work by Mr A. The Applicant had not been dismissed at that time. He wanted to remain in his job. He described the negotiations as difficult. He said he lost 5 or 6kgs in a month, his reputation was significantly damaged, and that he was under enormous pressure.[46]

    [45] Applicant’s SFIC [72].

    [46] Transcript 20, [1]-[5]. Applicant’s SFIC [72].

15. The Applicant’s evidence before the Tribunal was that the reasons that he agreed to settle included the fact that the compensation he would receive from the Employer was to compensate him for all of the Employer’s actions, the compensation was negotiated by the Fair Work Commission, and because it would receive favourable taxation treatment.[47] He said he was told he would otherwise have to take the matter to the Federal Court.[48] He also said he had less than a day to consider the Deed of Release as it was provided to him on the night of 28 June 2023. He also said that the Deed was drafted in a self-serving manner by the Employer.[49] The Applicant took advice, and he tried to contact the Employer’s lawyers without success to discuss the wording of the Deed.[50] He had no time and said he felt he had no choice.[51]

    [47] Applicant’s SFIC [72], [77].

    [48] T7, 96.

    [49] Applicant’s SFIC [75]-[78].

    [50] Applicant’s SFIC [76].

    [51] Applicant’s SFIC [72], [78].

16. The Applicant raised these facts with the Commissioner as part of the private ruling process[52] and as part of the objection process.[53] The surrounding circumstances to the entry into the Deed of Release is an aspect that the Applicant says the Commissioner did not give sufficient weight to in the second private ruling.[54]

    [52] T4, 75, T7.and T9, 148-149.

    [53] T10, T11.

    [54] Applicant’s SFIC [15], [16], [17], [19], [25].

17. The settlement is recorded in the Deed of Release.[55] The main aspects of the Deed provided:

    (a)The Applicant agreed to resign his employment on an agreed date.[56]

    (b)There was no admission as to liability on the part of any party to the Deed of Release.[57]

    (c)In consideration for agreeing to certain confidentiality and non-compete obligations, returning the Employer’s property, and releasing the Employer, its subsidiaries and all associates from all claims and liabilities,[58] the Applicant received payments and the Employer paid the Applicant the relevant after-tax amounts.[59]

    (d)Two of those gross payments were $189,000 which was stated as representing 12 months’ pay in lieu of notice, and $70,000 which was stated as representing an ex-gratia payment in addition to the 12 months’ pay in lieu of notice.[60] The aggregate of those payments comprises the payment at issue in this case. The Applicant does not accept that this description in the Deed is conclusive of the nature of these payments and says the Deed was simply the means by which he derived the negotiated payment.[61]

    (e)Mutual non-disparagement obligations were agreed.[62]

    [55] T3, 61-68.

    [56] Recital G and clause 2(a) Deed of Release, T3, 62, 64.

    [57] Recital E Deed of Release, T3, 62.

    [58] Clause 4 Deed of Release, T3, 64-65, clause 10, 66, clause 12, 67.

    [59] Clause 2 Deed of Release T3, 64.

    [60] Clause 2 Deed of Release, T3, 64.

    [61] I agree with the Applicant’s SFIC [17].

    [62] Clause 9 Deed of Release, T3, 66.

18. Income statements issued by the Employer indicate that the “ETP Taxable component” was treated as being $259,000.[63] This is the payment at issue in this case.

    [63] T3, 70.

    Scheme of the second private ruling

19. The private binding rulings regime is set out in Divisions 357 and 359 of Schedule 1 to the TAA. It provides for the Commissioner to issue rulings that are binding on the Commissioner as to how a taxation law applies or would apply to a specified scheme and specified taxpayer.[64] “Scheme” is defined widely in section 995-1 of the ITAA 1997 as including any arrangement, plan, proposal, action, course of action and course of conduct. The specified scheme of a binding ruling is the factual arrangement set out by the Commissioner in the binding ruling and this can include a future arrangement.

    [64] Section 359-1 of Schedule 1 to the TAA.

20. The case law is to broad effect that any additional information that is not outlined in the scheme of a private ruling cannot be taken into account by the Tribunal on review. This is because the Tribunal is limited to considering the facts as specified by the Commissioner in the private binding ruling and has no fact-finding role. [65] The Tribunal cannot revise nor adjust the scheme in the private ruling to include additional facts.[66]

    [65] The following cases describe the limitation to the scheme of the private ruling on review: Federal Commissioner of Taxation v McMahon 97 ATC 4986, 4990; Delacy v Federal Commissioner of Taxation [2006] AATA 198 [8]; Pierce v Federal Commissioner of Taxation 98 ATC 2240 [6]-[10]; Re Cooper Bros Holdings Pty Ltd trading as Triple Waste Management and Commissioner of Taxation [2013] AATA 99 [6]-[8]; Hall v Federal Commissioner of Taxation [2006] AATA 360 [19]-[22]; Senior and Commissioner of Taxation [2015] AATA 353 [26]-[36]; Co-operative Bulk Handling Ltd v Commissioner of Taxation [2010] FCA 508, [16]; Commissioner of Taxation v Co-operative Bulk Handling Ltd [2010] FCAFC 155); TBCL and Commissioner of Taxation [2016] AATA 264 [16]-[22]; The Public Servant and Commissioner of Taxation [2014] AATA 247 [42]-[53]; Yip v Federal Commissioner of Taxation [2011] AATA 785 [10]-[12]; Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231 [12]; Eichmann v Commissioner of Taxation [2019] FCA 2155 [22]; Bellinz v Commissioner of Taxation (1998] 84 FCR 154, 160; Commissioner of Taxation v Reef Networks Pty Ltd [2004] FCAFC 275, [6]; Toowoomba Regional Council v Federal Commissioner of Taxation [2025] FCA 161; Baya Casal v Deputy Commissioner of Taxation [2025] FCA 87.

    [66] Allen v Federal Commissioner of Taxation [2021] AATA 2768 took a different view and held that corrections could be made to the scheme of the ruling where those additional facts did not materially impact that scheme. I do not consider this case further, as in my view, the weight of higher authority is against the conclusion in Allen.

21. For instance, In Co-operative Bulk Handling Limited v Commissioner of Taxation [2010] FCA 508 [16] (not overturned on appeal)[67] the Federal Court held:

    Neither the Respondent nor the applicant can make good any deficiency in the scheme description. The Court is unable to consider a different scheme; it cannot investigate the facts on which the Respondent’s opinion was formed and make its own findings of fact, make assumptions, redefine the scheme or create its own description of the scheme.

    [67] Commissioner of Taxation v Co-operative Bulk Handling Ltd [2010] FCAFC 155 dismissed the appeal and upheld the lower court decision.

22. This means that when drafting the private ruling the Commissioner can, in effect, protect itself from review. Comments in The Public Servant and Commissioner of Taxation [2014] AATA 247 demonstrate this. In affirming the objection decision, Senior Member Lazanas expressed frustration at the manner in which the Commissioner had outlined the scheme in the private ruling, describing the decision to affirm the objection decision as:

    [D]ue to the self-fulfilling manner in which the Commissioner of Taxation described the ‘scheme’ in the private ruling issued to the Public Servant, leaving no room for any other answer on the question of law.[68]

    [68] The Public Servant and Commissioner of Taxation [2014] AATA 247, [4].

23. The short point from all of this is that the Tribunal’s review of an objection decision in relation to a private ruling is constrained in a manner that is not the position for the review of an objection decision in relation to an assessment. That constraint means the Tribunal may come to decisions it may not like (as is demonstrated by The Public Servant) where the scheme/factual arrangement of a binding ruling omits facts. The reason for the constraint on review of a private binding ruling is due to the special nature of a private binding ruling – the Commissioner is not investigating nor making findings of fact, it is ruling on a factual arrangement specified in the ruling. So, when reviewing the private binding ruling, the Tribunal is also not making findings of fact, and must also look at the factual arrangement specified in the binding ruling in determining whether the matters ruled are correct. As is noted above, the law is that the Tribunal has no ability to add facts or correct the arrangement as set out in the binding ruling.

24. This means that it is particularly important to consider the scheme of the second private ruling. In this case, the (redacted) second private ruling sets out the following (redacted) scheme:

    Relevant facts and circumstances

    • You commenced employment with the Employer and it’s [sic] related subsidiaries in 20XX.

    • You held the position of managing director and a statutory office of registered director of the Employer and the subsidiaries until XX/XX/XXXX.

    • On XX/XX/XXXX you sent an email to the Employer that contained a powerpoint summary of Australian transfer pricing laws.

    • On XX/XX/XXXX you sent another email to the Employer concerning the Australian transfer pricing laws.

    • Due to ongoing disagreements with the Employer about the correct application of the Australian transfer pricing laws, you lodged intelligence with the Australian Taxation Office, on XX/XX/XXXX.

    • On the same day, you also lodged an F8C form with the Fair Work Commission (FWC) for General Protection, seeking Protection due to Coercion and Undue Influence and Pressure (the Application).

    • On XX/XX/XXXX, you received a letter from the Employer’s senior solicitor, raising the Employer’s concerns about your actions. This letter also notified you that:

    - you had been removed from the Statutory Office of registered director of the Employer and it’s [sic] subsidiaries

    - your accesses [sic] to your regular phone number and work email had been removed

    - a replacement email address and new telephone number would be provided to you in due course

    - you had been placed on special leave and directed to not attend the Employer’s work premises or contact staff members or clients.

    • On XX/XX/XXXX, you and the Employer agreed to settle your differences via deed of release (the Deed) that was executed on the same date.

    • Recitals X, X, and X acknowledge that:

    - you lodged the Application with the FWC

    - on XX/XX/XXXX the Employer filled a Response to the Application, denying it took any adverse action against you; and

    - as a result of a conference before the FWC on XX/XX/XXXX, without admission to liability, you and the Employer reached an agreement to settle all matters relating to your employment in the position, and the statutory office, upon the terms set out in the Deed.

    • Recital X of the Deed states that your employment ‘will end by way of your resignation by the operation of this deed on XX/XX/XXXX (“the Termination Date”).

    • Clause X lists the relevant payments and benefits you accepted under the Deed. The payments that are the subject of this ruling are listed under clauses X and X. These are:

    - $XXX,XXX gross, representing 12 months’ pay in lieu of notice to be treated as an Employment Termination Payment for tax purposes; and

    - $XX,XXX gross representing an ex-gratia payment in addition to the 12 months’ pay in lieu of notice in clause X to be treated as an Employment Termination Payment for tax purposes.

    • Release clause X states that ‘in consideration of the payments and benefits set out in clause X, the Employee (you) unconditionally and irrevocably releases and discharges the Employer, the Subsidiaries and any Related Body Corporate, and each of its, and their directors, officers, employees or agents from all Claims and liabilities of any nature

    • Warranty clause X states that the Employee (you) ‘has taken independent legal advice, or has been given the opportunity to take legal advice, as to the nature, effect and extent of this deed.’

    • Sub-clause X then states that ‘this deed contains the entire agreement between the parties… It sets out the only conduct relied on by the parties and supersedes all earlier representations and conduct made by, or existing between, the parties with respect to its subject matter.’

    • The Employer issued a final payslip on XX/XX/XXXX and an income statement on XX/XX/XXXX. The income statement lists the ETP totalling $XXX,XXX as ETP type ‘O,’ with the full amount representing a taxable component.

    • A private binding ruling issued to you on XX/XX/XXXX under authorisation number XXXXX XXXXX XXX determined the payments totalling $XXX,XXX constituted an ETP.

    • On XX/XX/XXXX, you provided documentary evidence to support your contentions that the dismissal was due to harassment. This evidence has been captured above.

    Contentions

    On XX/XX/XXXX, you provided contentions to support your claims of mistreatment and harassment that led to your dismissal.

25. In the unredacted second private ruling, following the sentence labelled “Contentions” are a series of sentences (numbered paragraphs 18 to 42). I have not included those in this decision because of confidentiality sensitivities, but these sentences are considered at a high level further below.

    REASONS FOR DECISION

    Issue 1: Preliminary issues arising because of the existence of private ruling and an assessment

26. Following a question from the Tribunal at the hearing on 20 January 2025, the Commissioner confirmed there was also an assessment on foot for the 2024 income year. The file demonstrates that the Commissioner told the Applicant to file his return at the time and in the manner in which he did when the Applicant asked the Commissioner about what to do.[69] It was unsatisfactory to learn from the Commissioner of the existence of an assessment as well as a ruling at the hearing and only because the Tribunal asked the obvious question.  

    [69] T13, 170 and Applicant’s question to the Respondent T13, 172.

1. The fact there was an assessment and the second private ruling on foot at the same time resulted in the need to consider the procedural issues specified below. The Tribunal had to put the issues to the Commissioner for resolution and the Commissioner did not identify any of the issues that arose as a consequence of there being an assessment and a ruling. The Commissioner also had no concluded position on the consequential procedural issues on the day of the hearing, resulting (ultimately) in two adjournments.

2. The Commissioner submitted that the “proceeding [was] not protracted in any substantive sense by the fact that the Commissioner did not appreciate, until the morning of the hearing, that an assessment had been issued.”[70]  This is a courageous submission. Delays are a waste of the Tribunal’s time and resources. In this case there were two delays so that the Commissioner could determine its position on issues the Tribunal had to identify for the Commissioner, which the Commissioner ought have been across, and the cause of the delays was the Commissioner’s revelation on the day of the hearing about the existence of the assessment. The Commissioner may not find that time “substantive,” but the Tribunal finds any adjournment (let alone two) substantive. The case was initially set down for 20 January 2025 and took until 14 February 2025 to be completed. It took into March for Closing Submissions to be filed. The Tribunal’s resources are better spent.

   [70] Commissioner’s Submissions on Procedural Issues dated 11 February 2025 (“Commissioner’s Procedural Submissions”) [15(e)(ii)].

3. Further, the Commissioner was invited by the Tribunal to engage with the Applicant on these issues outside of the Tribunal processes and no such engagement occurred. The Applicant was unrepresented and needed to have the issues explained to him. It fell to the Tribunal to use its time and resources to do that. While the Commissioner was not ordered to engage with the Applicant, the fact it failed to do so when encouraged, does not make the Commissioner’s submission above seem any less courageous.

4. In short, the Tribunal expects more of the Commissioner as a model litigant than was demonstrated by its management and presentation of this case.[71]  

   [71] The Tribunal records that the Commissioner frustrated the Tribunal by filing material – including (but not limited to) the Commissioner’s Closing Submissions – under the wrong proceeding number. This was raised prior to the Commissioner’s Closing Submissions with the Commissioner, and it happened again. This caused a further waste of the Tribunal’s resources as it scrambled to find material relevant to this case amongst the many thousands of documents it receives. This should have been picked up by the Commissioner’s internal lawyers. The Applicant picked this up - the Applicant’s Final Closing Submission to the Administrative Review Tribunal dated 18 March 2025 (“Applicant’s Closing Submissions”) [1].

   Ability of the Applicant to file proceedings against the second private ruling

5. Section 359-60 of Schedule 1 to the TAA provides that an objection, review or appeal against a private ruling is not possible where there is an assessment for the income year to which the ruling relates. The assessment was issued on 13 September 2024 and the objection to the second private ruling was filed on 22 April 2024. There was no assessment at the time the objection to the second private ruling was made. The Commissioner accepted that the Application for Review which was filed on 5 September 2024 was also validly made for the same reason.[72]  The Tribunal agrees with those conclusions.

   [72] Commissioner’s Procedural Submissions [2]-[4].

6. At the time, the Commissioner considered this to be the only relevant issue.[73] The Tribunal disagreed, and the Tribunal had to identify the other issues for the Commissioner. The Tribunal notes without irony that the Commissioner’s Closing Submissions include submissions about the issues below to advance its case.[74]  The Tribunal does not criticise that per se. It notes that point to suggest that the Commissioner should have been across all the issues, as that may have saved at least one adjournment.

   [73] Commissioner’s Procedural Submissions [15((e)(ii)].

   [74] For example, Commissioner’s Closing Submissions [4] and [5].

7. The Applicant is unrepresented, and he is not a tax professional. Fairness dictates that he be given all of his potential options.

   The Applicant’s evidence at the hearing

8. Section 359-65 of Schedule 1 to the TAA allows the Commissioner to consider additional information provided by the taxpayer in considering an objection to a private ruling as long as it does not make the scheme materially different from that in the private ruling. If that additional information is a material change to the scheme in the private ruling, the Commissioner must advise the taxpayer to seek another ruling and the objection is taken to not have been made.[75]  No advice to seek another ruling was provided by the Commissioner to the Applicant when considering the objection to the second private ruling.

   [75] Subsection 359-65(3) of the Schedule 1 to the TAA.

9. At the hearing on 20 January 2025, the Applicant gave evidence that he had been forced out by the Employer, he described being excluded from meetings, he described the staff and customers being notified he was out or would be “gone soon,” he described reputational damage for him, and he described being requested to resign.[76] The Applicant’s evidence had been put to the Commissioner prior to the second private ruling being issued as well during the objection.[77] The Commissioner did not cross-examine the Applicant and has not challenged that evidence. There is also other evidence put to both the Commissioner and the Tribunal by the Applicant. This included the lack of an employment contract between the Applicant and the Employer, the applicable notice periods for termination or resignation of the Applicant’s employment, the fact the Applicant was removed from directorships without notice, facts relating to the Applicant’s filing at the Fair Work Commission and his ability to claim unfair dismissal, and he described the circumstances surrounding the signing of the Deed of Release to explain that he felt he had no choice but to sign it as it was, despite issues with it, including its wording.[78] The Commissioner says the Applicant’s evidence is irrelevant and not probative.[79] 

   [76] See paragraph ‎41 above. The Applicant’s evidence is more broadly set out at paragraphs ‎22 to ‎44 above.

   [77] For example, T4, T5-81 to 82, T7-95 to 99, T7-131 to 133, T9. It is also outlined in the Objection at T10.

   [78] See paragraph ‎41 above.

   [79] Commissioner’s Procedural Submissions [6(a)].

10. The Commissioner says[80] the evidence raised by the Applicant was considered as part of the objection process. It was also considered prior to the second private binding ruling being issued.[81] The Commissioner says it found that the Applicant’s evidence did not demonstrate that the payment was made in connection with harassment or discrimination.

    [80] Commissioner’s Procedural Submissions [11].

    [81] The final two sentences in the scheme of the second private ruling shows the Applicant’s evidence was considered before the ruling was issued.  

11. The Commissioner then says that it would have advised the Applicant to apply for a further private ruling if a different view had been taken in the objection (i.e., that the Applicant’s evidence was relevant or did establish the payment was made in connection with harassment or discrimination).[82] That suggests the Commissioner’s view is that the facts asserted by the Applicant were material as subsection 359-65(3) of Schedule 1 to the TAA requires the Commissioner to advise a taxpayer to seek a further binding ruling only in circumstances of material change.

    [82] Commissioner’s Procedural Submissions [11].

12. This means that the Commissioner is saying that the Tribunal should consider the Applicant’s evidence irrelevant, and if the Tribunal is not to find that, the Tribunal should consider the Applicant’s evidence as material.[83] These submissions seem to lack coherence. How can it be said something is both irrelevant and material? This was put to the Commissioner by the Tribunal.

    [83] The Respondent had this evidence prior to the second private ruling being issued and did not advise the Applicant to seek another ruling.

13. The Tribunal understands from the various submissions made in response, that the Commissioner’s position is that the evidence is irrelevant to the Tribunal because the Tribunal is constrained to the scheme of the private ruling, the evidence is not in that scheme. The Tribunal also understands the Commissioner to then maintain that the Applicant’s evidence is not probative and not relevant for that reason. And, if the Tribunal disagrees with all of this, then the Commissioner’s position seems to be that the Applicant’s evidence is material, and a new ruling should be sought.

14. The Tribunal was left to explain this to the unrepresented Applicant.

    Whether the Applicant should protect his position by objecting to the assessment

15. On the point relating to the Applicant’s evidence and whether it can be considered in the current matter before the Tribunal, the Commissioner’s SFIC included submissions about the Tribunal’s limited role in reviewing the objection decision to the second private ruling including by reference to section 359-65 of Schedule 1 to the TAA.[84]

    [84] Respondent’s SFIC [23]-[25]. See also the cases noted at paragraphs ‎45-‎46 above.

16. With that context in mind, the next issue when considering the Applicant’s evidence at the hearing is whether it forms part of the scheme or factual arrangement that the Commissioner drafted in the second private ruling. The Commissioner says the Applicant’s evidence is not outlined in the scheme of the second private ruling.[85] I consider that further below when considering the second issue in these reasons. That is set aside for now.

    [85] Commissioner’s Procedural Submissions [6(b)]. Commissioner’s Closing Submissions [17]-[19].

17. The problem is the Applicant can present whatever he likes to the Tribunal (for instance, in his objection, in his application for review, or in other material),[86] but the Tribunal’s task on review of the second private ruling is to determine whether the Commissioner’s conclusions in the second ruling were right, based solely on the facts set out in the scheme of the ruling, and no other material.[87] This is for the reasons described above,[88] and was explained to the Applicant at the hearing.

    [86] Such as the statement that the Applicant has presented from a former colleague.

    [87] The Applicant’s Closing Submissions at [4] correctly say there is nothing stopping the Tribunal from reviewing the private ruling (which is what has been objected against), but the Applicant needs to appreciate the limitations imposed on the Tribunal at law which were explained to him at length at the hearing.

    [88] See paragraphs ‎46 to ‎49 above.

18. Assuming that the Commissioner is right, and the Applicant’s evidence is not included in the scheme of the second private ruling, the further procedural question was whether the Applicant’s evidence could be considered when reviewing any objection decision relating to the Applicant’s assessment. That is, it is important to provide the Applicant the opportunity to consider whether the Applicant should object to the assessment to ensure all information the Applicant wishes to be considered can actually be considered by the Tribunal. This assumes, of course, that any such objection to the assessment is disallowed by the Commissioner and the matter is then before the Tribunal. However, an objection to the assessment may be able to be held in abeyance by the Commissioner while the Tribunal considered the present proceedings and could merely protect the Applicant’s position.[89]

    [89] The Commissioner’s Procedural Submissions do not consider this potential option and focus only on the other option – an adjournment of the present proceedings – making submissions about its view of the Tribunal’s duties and proper exercise of power. Commissioner’s Procedural Submissions [15(e)(iii)-(iv)].

19. The Applicant is unrepresented, so the Tribunal raised the above issues with him. The Commissioner did not identify these issues.

20. The question of whether an objection to the assessment is possible in circumstances where there has been an objection to a private ruling involves considering section 14ZVA of the TAA. Section 14ZVA provides that where there has been an objection to a private ruling, the right to object to an assessment “related to the matter ruled” is limited to “grounds that neither were, nor could have been, grounds for taxation objection” against the second private ruling. There are questions when interpreting section 14ZVA of the TAA including whether when interpreting section 14ZVA “the matter ruled” in the second private ruling could even possibly include any additional facts if they do not form part of the scheme of the second private ruling.[90] The Commissioner was asked for its position on section 14ZVA.

    [90] The Public Servant and Commissioner of Taxation [2014] AATA 247 [71]. Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231 [32].

21. The Commissioner’s position is that where the Applicant’s evidence is a material change to the scheme of the second private ruling, then the Applicant can object to it in an objection to the assessment.[91] 

    [91] Commissioner’s Procedural Submissions [14]. This is consistent with Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231.

22. The Commissioner’s Procedural Submissions say “[e]ven though the Applicant’s real complaint in this appeal[92] is that the Commissioner misstated the facts in arriving at the private ruling, as that is not a valid ground to challenge a private ruling, the Commissioner does not contend that s14ZVA of the TAA would prevent the Applicant from contending as part of that objection [being in context, the objection to an assessment] that the facts are different to those stated in the objection.”[93] This is an unintelligible sentence unless it is read with the final word as (potentially) “ruling”, but it is not clear what the Commissioner intended to say in any event. To be consistent with the earlier submissions, the Commissioner might say that the Applicant is not prevented from objecting to the assessment only where the Applicant’s factual evidence comprises a material change to the ruling scheme. It is all very unclear. The Tribunal’s job is not to try and make the Commissioner’s submissions coherent. That is for the Commissioner.

    [92] This is not the Applicant’s “real complaint”. The Applicant’s view is and always was that his evidence is outlined in the scheme to the second private ruling: for example, Transcript, 12 [26]-[28], [35]-[41]. It was the Tribunal putting these issues to the Applicant in order to ensure an unrepresented Applicant understood and could consider his options carefully. The Commissioner repeats this language in the Commissioner’s Closing Submissions at [3]. The Applicant also disputes this is his “real complaint” in the Applicant’s Closing Submissions [2].

    [93] Commissioner’s Procedural Submissions [15(b)].

23. I do not need to decide any issue relating to section 14ZVA of the TAA because of the Applicant’s position as outlined below. I make only minor comments below:

    (a)I do not quibble with the Commissioner’s citation of the Explanatory Memorandum to the Tax Laws (Improvements to Self Assessment) Bill (No.2) 2005 (Cth) when considering section 14ZVA of the TAA. [94]

    (b)However, in hypothetical circumstances where the Commissioner has selected certain facts presented by a hypothetical taxpayer to appear in a private ruling and not included other facts, it would be concerning if the Commissioner was interpreting the combination of section 14ZVA of the TAA and section 359-65 of Schedule 1 to the TAA in a manner that did not allow that taxpayer to raise in any objection the ‘real’ facts which were not specifically outlined in the ruling scheme. This is particularly troubling where the hypothetical taxpayer did not have the factual scheme of the binding ruling put to them prior to the ruling being finalised (this is the circumstance for the Applicant in this case).

    (c)In my view, at a high level, the binding rulings regime is intended to have the Commissioner reach taxation conclusions based on facts provided by the ruling applicant.[95] Case law has previously emphasised the importance of the applicant setting out with particularity the arrangement in respect of which the ruling is sought.[96] This is also reflected in the Private Ruling Application form on the Commissioner’s website,[97] as that document specifies a requirement for the taxpayer to describe the “facts describing the scheme or circumstances”. While of course the Commissioner must draft the ruling and editing may occur, I do not think that Parliament intended the Commissioner to be able to selectively set out facts described by an applicant for a binding ruling, and then to be able to pivot in its interpretation of each of section 14ZVA of the TAA and section 359-65 of Schedule 1 to the TAA so that the Commissioner is broadly unchecked on review if that hypothetical taxpayer first objects to the binding ruling. [98]  For clarity, I am not taking the view that is what the Commissioner is doing in the present case as I do not expect the Commissioner is intending this, but the Commissioner’s submissions are unclear.

    (d)Given the manner in which a review of a private ruling is constrained, in my view, the Commissioner should, as a matter of practice, put the draft scheme of a binding ruling to the taxpayer for review prior to its finalisation, specifying which parts of the ruling comprise the scheme, and explaining the importance of the scheme covering all of the facts that the taxpayer considers relevant due to the constraints on review of the binding ruling if the taxpayer disagrees with it. No doubt the Commissioner might consider this an additional burden to its already considerable administrative burden, but the Commissioner could manage this by setting a firm deadline for response.

    (e)The Tribunal also encourages the Commissioner to consider its position on the provisions outlined above carefully so any future case where decisions on these issues is required does not face the issues the Tribunal had in this case.

    [94] Commissioner’s Procedural Submissions [14] – although the submission does not state it is from that Explanatory Memorandum.

    [95] FC of T v McMahon 97 ATC 4986, 4990 “When making a private ruling the Commissioner does not make findings of fact. He simply identifies facts and then states his opinion about the way in which the relevant tax laws apply to the applicant in relation to those identified facts…. [B]efore the Tribunal, the subject matter of review is the arrangement as identified by the Commissioner in his private ruling.” By selecting particular facts and ignoring others in the scheme of a private ruling, the Commissioner might be maintained (arguably) to be making findings, but the Tribunal does not need to come to a view on this point.

    [96] National Speakers Association of Australia Inc v Federal Commissioner of Taxation [1997] FCA 1371, 1375.

    [97] As was noted in Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231 at [31]-[32] this would create an impermissible incontestable tax.

The Applicant’s concluded position

The above issues were explained to the Applicant at some length and the associated risks of continuing the current proceedings. It was particularly noted that the Tribunal might conclude it could not consider some of his evidence when determining if the Commissioner’s private ruling conclusions were correct, because of the manner in which the Commissioner drafted the scheme of the second private ruling. It was specifically said that might result in the Tribunal finding against the Applicant. The option of objecting to the assessment was put to the Applicant.

1. After an adjournment to give the Applicant time to take advice (if he wished) and consider the issue, the Applicant determined[99] that he did not wish to separately object to the assessment at this stage and would rather proceed to have his current proceedings determined by the Tribunal.

   [99] Applicant’s email to the Tribunal and the Respondent dated 15 February 2025.

   Issue 2: Whether the Applicant’s evidence is included in the scheme of the second private ruling

2. In the Commissioner’s SFIC, the Commissioner noted that documents identified in the description of the scheme of the second private ruling can be considered and are relevant to the Tribunal’s decision.[100]

   [100] Commissioner of Taxation v Eichmann [2019] FCA 2155, [22(g)]. These holdings were not overturned in the successful appeal in Eichmann v Commissioner of Taxation [2020] FCAFC 155.

3. Such documents and their contents form part of the ruling scheme. This is clear from the Explanatory Memorandum to the Taxation Laws Amendment (Self Assessment) Bill 1992 (Cth) at 42:

   A Private Ruling must identify the person, year of income and arrangement to which it applies and any assumptions made in the ruling. This is important for the purposes of determining the extent to which a ruling is binding and allowing for the review of Private Rulings by the AAT and courts. Since the description of an arrangement might otherwise become quite lengthy, the law allows an arrangement to be identified in a Private Ruling by reference to a document which contains details of the arrangement, but only if the person to whom the ruling will apply has access to that document. (Emphasis added)

4. The (redacted) scheme of the second private ruling includes:

   On XX/XX/XXXX, you provided documentary evidence to support your contentions that the dismissal[101] was due to harassment. This evidence has been captured above.

   [101] The Applicant’s unchallenged evidence was that he was not dismissed from his role as a senior employee. The Tribunal assumes that the Commissioner is saying dismissed in the sense of “constructive dismissal” due to the actions of the Employer – noting that the Commissioner accepts that constructive dismissal is a form of dismissal in TR 2009/2 Income tax: genuine redundancy payments [22].

5. The redacted date in that sentence is 2 April 2024. When that correspondence is reviewed, that material shows the discussions between the Applicant and the Employer relating to the appropriate management of transfer pricing issues and information about the transfer pricing rules.[102]  This material is consistent with the third and fourth bullet points of the scheme of the ruling set out above at paragraph ‎50.

   [102] The Tribunal requested a copy of this correspondence after the hearing from the Applicant and Respondent. For clarity, this was on the T documents, and the Tribunal missed it initially because the T document index did not identify this document.

6. The redacted scheme of the second private ruling also includes:

   Contentions

   On XX/XX/XXXX, you provided contentions to support your claims of mistreatment and harassment that led to your dismissal.

7. The redacted date in that sentence is 28 March 2024. When that correspondence is reviewed, it includes the following (amongst other matters):

   (a)An email from the Applicant to the Commissioner setting out behaviours from the Employer that isolated the Applicant, excluded him from meetings, and where assertions were made that he would be “gone soon.”

   (b)Following the Applicant’s filing of proceedings in the Fair Work Commission, that the Employer’s actions included the ultimate removal from his directorships, severance of his access to the workplace, advice to customers and staff not to contact the Applicant, prohibition on the Applicant from contacting the Applicant, damage to his reputation, and pressure to resign. This material is broadly consistent with the material at bullet point 7 of the scheme of the ruling.

   (c)Attachments that comprise evidence of the above matters – such as emails between the Applicant and the Employer which refer to the above, and all of which predate the Deed of Release.

8. The reference to the 28 March 2024 correspondence is included in the section comprising the ruling scheme, prior to the conclusions reached on the questions asked in the ruling. However, the redacted ruling does not include a list of matters outlined as paragraphs 18 to 42 in the unredacted ruling. Those matters are labelled “Contentions” in the unredacted ruling and they set out a substantial part of the Applicant’s (unchallenged) evidence. The Commissioner’s view is that those matters are not part of the ruling scheme.[103]

   [103] Commissioner’s Closing Submissions, [17]. Commissioner’s Procedural Submissions [6(b)].

9. The Tribunal is troubled by the form of the second private ruling. Why has the Commissioner labelled some factual matters “contentions” and others not? When did a “contentions” section in a private ruling arise in any event? How are the following example statements contentions? – “The [Employer] wrote to all customers, informing them that you had been removed as a director, without offering any explanation whatsoever” or “In February 2023, the [Employer] stopped having the regular sales review meetings which previously included [the Applicant]. No explanation was given.” In reality the matters labelled “Contentions” are not contentions, they are facts. The facts set out under that heading in the unredacted second private ruling set out a course of conduct from the Employer. This meets the definition of “scheme” in section 995-1 of the ITAA 1997.

10. The Tribunal considered any possible reasons for the form of the second private ruling. The Commissioner cannot say that the form of the second private ruling merely mirrors the Application for a Private Ruling. It does not. Looking at the Applicant’s Application for a Private Ruling[104] the Applicant’s evidence is set out substantially. In the section labelled “Relevant background facts and circumstances”[105] paragraphs 3 and 5 set out the Applicant’s exclusion from meetings but this is not set out in the part of the ruling the Commissioner’s Closing Submissions consider to be the scheme. Under “detailed reasoning”[106] in the Application the Applicant’s exclusion from meetings, restrictions on the Applicant and the steps taken by the Employer against him were set out. This means the form of the Application for a Private Ruling does not excuse the form of the second private ruling. In any event, to the extent the Applicant’s evidence is set out in other correspondence with the Commissioner, the Commissioner issues rulings taking into account facts provided by applicants both in the ruling application and in other correspondence with the Commissioner all the time, and the statutory architecture provides for this.[107]

    [104] T3.

    [105] T3, 21.

    [106] T3, 23-25

    [107] Section 357-105 and section 357-115 of Schedule 1 to the TAA.

11. In the Tribunal’s view, the use of the word “Contentions” above a series of facts seems to be an effort to sift out facts from the scheme of the second private ruling. The Tribunal reminds the Commissioner that it is not making findings of fact in a private ruling and the Commissioner is ruling on a factual scheme put to it by the Applicant.[108] The statutory provisions provide the Commissioner with the ability to make assumptions about any matter[109] and that would be an appropriate route to deal with any concerns.

    [108] Federal Commissioner of Taxation v McMahon 97 ATC 4986, 4990 – see footnote 95 above.

    [109] Section 357-110 of Schedule 1 to the TAA.

12. Making the form of the second private ruling more concerning, the Commissioner submits that it considered the Applicant’s evidence when considering the second private ruling but did not consider it probative.[110] That submission means that the facts submitted by the Applicant that are labelled “Contentions” were taken into account and were not considered to satisfy the relevant legal test. That is exactly the task undertaken by the Commissioner when considering the scheme of a ruling. So, the Commissioner is submitting certain facts are not in the scheme of the ruling, but it has undertaken exactly the same task as it did with facts it accepts are in the scheme of the ruling.

    [110] Commissioner’s Procedural Submissions [6(a)].

13. I find the form of the second private ruling troubling. I think that the manner in which the scheme is set out involves an inappropriate manipulation of the form of a private ruling. Was this “Contentions” section designed to try and insulate the Commissioner’s second private ruling from review on the basis of these facts? Given the Commissioner is not making findings of fact in a private ruling, it is hard to conclude otherwise. Inserting a heading saying the Applicant’s facts are something else does not magically transform them into other than what they are, facts. I do not consider the form of the second private ruling to be effective to achieve the outcome suggested by the Commissioner’s Closing Submissions.[111]

    [111] That is, that the matters under the heading “Contentions” are not part of the scheme of the second private ruling – Commissioner’s Closing Submissions, [17]. Commissioner’s Procedural Submissions [6(b)].

14. I find that the matters listed at paragraphs 18 to 42 of the unredacted ruling are part of the scheme of the second private ruling. I do not accept the Commissioner’s submissions otherwise.[112]  When the matters listed at paragraphs 18 to 42 of the unredacted ruling are taken into account the points specified at paragraph ‎83(a) above are set out at paragraphs 20, 22, 24, 25, 26, 27 and 28, the matters specified at paragraph ‎83(b) above are set out at paragraphs 23, 26, 27, 35, 38, 39 of the unredacted second private ruling. Paragraph ‎83(c) is evidence of those matters and does not comprise additional facts.

    [112] The Tribunal notes that it considered whether the form of the second private ruling invalidated the ruling. The conclusion was that could not be the position as the matters specified in section 359-20 of Schedule 1 to the TAA were in the second private ruling.

15. Citing Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231, the Commissioner’s Closing Submissions submitted at [9]:

    Further, a reference in the body of the private ruling to documents that were before the Commissioner does not expand the facts as stated in the scheme or permit the Tribunal to engage in a fact-finding exercise. The Tribunal is not given a licence to examine those documents to the end of making a finding of fact which is at variance with or not found in the Commissioner’s description of the facts of an arrangement for the purposes of the ruling. Nor can the Tribunal draw inferences of fact which are at variance with or not found in the description the Commissioner has given of the arrangement: Rosgoe at [20].

16. The Tribunal is taking into account the facts in documentary material referred to in the scheme of the ruling (in the redacted ruling by reference to the documentary correspondence, and in the unredacted ruling by reference to the listed facts), and both Rosgoe and other cases confirm that this is permissible.

17. Other cases confirm the position. In Baya Casal v Deputy Commissioner of Taxation [2025] FCA 87 at [38] and [42]:

    [38] I accept that the reference to the 5 October 2021 letter in the ruling, both as a document to which the respondent had regard and indirectly in scheme [2], is enough for the court to have regard to the letter itself with a view to drawing factual inferences: Eichmann 2020 at [16], citing Eichmann [2019] at [22]; Co-operative Bulk Handling at [26], citing Bellinz at 160. I accept also that there is nothing preventing the court from using the 5 October 2021 letter to identify uncontroversial ways in which the facts of the scheme may be construed and better understood, and that there is no controversy in adding to the understanding of the ruled facts by noting what would have been the change in the applicant’s working hours and remuneration in each of the new roles offered to her. To the extent that the respondent submits that it is not permissible to do so because these facts are not stated in the scheme itself, I do not accept that submission. [….. ]

    [42]  I have accepted, consistently with the principles identified in Eichmann (2020) (at [16], approving the propositions summarised by Derrington J in Eichmann [2019] at [22]), that it is permissible for the court to use the 5 October 2021 letter to define and better inform an understanding of the scheme. It is not, however, permissible to use it to identify additional facts. (emphasis added)

18. I have demonstrated above at paragraph ‎90 that the Tribunal has acted permissibly. The Tribunal is not identifying additional facts by taking into account the 28 March 2024  correspondence referred to in the redacted second private ruling. For those reasons I find that the majority of the Applicant’s evidence is outlined in the scheme of the second private ruling.

19. I have come to the above conclusion about the majority of the Applicant’s evidence, but I specifically note that there are some critical matters in the Applicant’s evidence and/or in material before the Tribunal that are “additional facts” as they are not set out in the scheme of the private ruling, and cannot be said to be merely clarifying facts that are set out. This means the Tribunal is constrained and cannot consider these matters when determining whether the private ruling is correct. The correctness of the conclusions in the private ruling must be assessed only in relation to the facts outlined in the private ruling scheme.

20. These facts are:

    (a)The Applicant was requested to resign and pushed back against that.

    (b)The Applicant’s directorships were removed with no notice.

    (c)The requirement to rehire Mr A and subsequent events where Mr A ostensibly took over the Applicant’s duties.

    (d)The Applicant did not have an employment contract. This meant that if he resigned there would be no notice requirements, no notice was said to have been required if he was terminated for serious misconduct[113] and the minimum from National Employment Standards is required for any other form of termination.[114]

    (e)The Applicant was unable to make a claim for unfair dismissal in the Fair Work Commission because his salary was above the cap in the FWA,[115] and the business had less than 15 employees. Other than in circumstances where protection had been sought from the Fair Work Commission first, the Applicant could not pursue an unfair dismissal claim in the Federal Court. [116] In any event when the Applicant filed his Fair Work Commission claim, he wanted to remain in his job.

    (f)The Applicant was unable to make a claim for harassment or discrimination until the conciliation at the Fair Work Commission, and he raised those issues at that time.[117] 

    (g)The Applicant was given no time to consider the Deed of Release and was told it would be withdrawn unless he agreed to it by the next day. The Applicant tried to speak to the Employer’s lawyers about the wording of the Deed of Release and was unable to. It was not a position where both the Employer and the Applicant had the same bargaining strength.[118]

    (h)There were other payments made under the Deed of Release.

    Issue 3: Whether the Applicant has demonstrated that the payment was in whole or part an “excluded payment” under paragraph 82-10(6)(d) of the ITAA 1997

    [113] Section 117 of the FWA.

    [114] Applicant’s SFIC 3, and 18, [19].The Applicant asserted that National Employment Standards applied because he had no employment contract: and Part 2-2 and s14 of the FWA.

    [115] Section 382 of the FWA.

    [116] T9, 148.

    [117] Applicant’s September Submissions, 2. Applicant’s SFIC [70], [75]-[78].

    [118] There are an array of facts put by the Applicant to this effect – for instance in the Applicant’s Objection T10 [19].

21. Section 82-10 of the ITAA 1997 is set out above at paragraph ‎13. The Applicant’s case is that paragraph 82-10(6)(d) is applicable. That reads:

    (6)  Paragraph (4)(c) does not apply in relation to * life benefit termination payments: [….]

    (d)  that:

    (i)  are paid in connection with a genuine dispute; and

    (ii)  are principally compensation for personal injury, unfair dismissal, harassment, discrimination or a matter prescribed by the regulations; and

    (iii)  exceed the amount that could, at the time of the termination of your employment, reasonably be expected to be received by you in consequence of the voluntary termination of your employment.

22. Subparagraphs 82-10(6)(d)(i) and 82-10(6)(d)(iii) are not disputed by the Commissioner in the second private ruling.[119] The source of disagreement is subparagraph 82-10(6)(d)(ii). All of the subparagraphs must be satisfied.

    [119] T8, 138 [9], T8, 141.

23. The first issue to consider is the meaning of “principally.” It is not defined in the ITAA 1997. In plain meaning that means ‘chiefly’ or ‘mainly.’[120]  Other provisions in the ITAA 1997 use the word “principally” (for example section 820-32, section 43-72, section 50-50) and there is case law to support the view that the ordinary meaning of “principally” should be adopted when considering its meaning in the context of the ITAA 1997.[121]

    [120] Macquarie Dictionary (Online edition as of 1 April 2025) -  – “principally”.

    [121] Federal Commissioner of Taxation v Word Investments Ltd [2008] HCA 55, [68], [73]. SSAU Nominees Pty Ltd v Federal Commissioner of Taxation 85 ATC 4632, 4,642.

24. This means that the question is whether the payment is principally, chiefly or mainly for “personal injury, unfair dismissal, harassment, discrimination or a matter prescribed by the regulations.”  In terms of the reference to the regulations, this is a reference to the Income Tax Assessment (1997 Act) Regulations 2021 (Cth)[122] and no such matters appear to have been prescribed.

    [122] Revised Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No.3) Bill 2012 (Cth).

25. The second private binding ruling adopts the position that the wording of the Deed of Release is of significant weight when determining what the payment is for. The Commissioner’s Closing Submissions accord with that, commenting that it is important that the Applicant did not seek to rectify that wording, or have it set aside.[123] The Deed of Release says the payment is “in lieu of notice.” The wording of the Deed of Release could be challenged as the Applicant says it cannot be correct. This is because he had no employment contract and the amount paid cannot reflect the applicable notice periods as the payment was well in excess of any such periods. The payment must have been for something else. The Applicant also says his directorships were removed without notice as an example. None of this material is in the scheme of the second private ruling so the Tribunal cannot consider it when determining if the second private ruling is correct. All the Tribunal can do is look at the scheme of the private ruling and consider whether the second private ruling is correct on the basis of the facts set out by the Commissioner. If the Applicant objected to the assessment instead, all matters could be considered. But that is not what we are dealing with in this case.

    [123] Commissioner’s Closing Submissions [45].

26. When considering paragraph 82-10(6)(d) of the ITAA 1997 the Applicant’s objection focuses on harassment and discrimination, rather than unfair dismissal. There may be an available argument on the facts for the Applicant in relation to unfair dismissal. The Applicant explained that the only method available for him to raise his concerns about the actions of the Employer was via a route seeking protection from the Fair Work Commission, as he could not claim unfair dismissal due to the size of the Employer and the cap in the FWA. The correctness of that would need to be assessed. There would need to be some consideration to any role of the Federal Court in unfair dismissal matters.[124] Features of the evidence involving Mr A and his role in replacing the Applicant, giving rise to (arguably) constructive dismissal would be relevant.[125] The Applicant not being formally dismissed would be relevant. There would be a legal question as to whether the reference to unfair dismissal in the ITAA 1997 requires a court filing or is a wider concept in the ITAA 1997. There would also be a legal question about what the Applicant’s grounds of objection are in the context of the objection being dealt with in this case.[126] What would be considered is whether the grounds of objection are about the application of paragraph 82-10(6)(d) or whether the grounds of objection are more narrowly focused on harassment and discrimination. This is because section 14ZZK of the TAA provides that the Applicant is limited to his grounds of objection and there is a question whether the Applicant can raise issues such as unfair dismissal. Case law on those points would need to be considered. The Applicant would need to demonstrate the payment was principally for unfair dismissal. However, the critical facts to consider unfair dismissal or any of those issues are not in the scheme of the second private ruling. That means the Tribunal cannot consider these matters in this case.

    [124] As referred to in the Applicant’s Objection T10, [7], the Applicant’s SFIC [71].

    [125] As would some of the evidence about the Applicant being excluded from meetings.

    [126] Assuming that the Objection at T10 and not a fresh objection was being considered, and assuming that no leave had been sought and granted to expand the grounds of objection at T10 if that is required at law.

1. There might also be an argument about the payment being for personal injury (at least in part) given the nature of the Applicant’s description of the impact of events on his health referred to (for instance) in paragraph 42 of the unredacted second private ruling (which I can consider). This has not been raised by the Applicant and there is little evidence of injury or health impacts in the scheme of the second private ruling – merely a sentence. It might be maintained that as the payment is not in lieu of notice as suggested in the Deed of Release, it must be for a combination of “personal injury, unfair dismissal, harassment, discrimination.” Similar legal issues set out above (including those relating to the grounds of objection) would require consideration. The Applicant would need to demonstrate the payment was principally for those matters. As critical facts to consider those issues are not in the scheme of the second private ruling, merely a sentence, the Tribunal cannot consider these matters in this case.

2. It might be said that the surrounding circumstances to the Applicant’s acceptance of the Deed of Release are relevant to its interpretation.[127] For instance it might be said that the Employer put the Applicant in a position where the Deed of Release was in a form that could not be amended, there was duress at law, or it could be argued the form of the Deed of Release did not reflect the Applicant’s position as to the nature of the payment received because of those surrounding circumstances. There would be legal issues about the ability to consider surrounding circumstances when interpreting the Deed of Release and case law would need to be considered. But for the current case, the critical facts to consider those issues are not in the scheme of the second private ruling. That means the Tribunal cannot consider these matters in this case.

   [127] Sladden v Federal Commissioner of Taxation [2024] FCAFC 122 [34]. [45]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Limited [2015] HCA 37; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24.

3. For clarity, the Tribunal has made no decisions at all about the merits of the above matters. It has not considered them. I specifically note that there are available counterarguments to all of the above matters, and the Applicant has to meet the principally test. The point is to demonstrate to the Applicant that the absence of critical facts in the scheme of the second private ruling constrains the Tribunal.

4. It falls for the Tribunal to consider whether the Applicant has met his burden of proof of demonstrating that the payment was principally for harassment or discrimination. The first question is what each of harassment and discrimination mean in paragraph 82-10(6)(d). The Commissioner’s Closing Submissions at [42] take the view that ‘actionable’ harassment or discrimination is required, because paragraph 82-10(6)(d) requires the payment at issue to be “compensation for” those matters. The Commissioner says that wording means there must be a legal right to compensation. The Applicant takes the view that harassment and discrimination bear their ordinary meaning, and this is wider than the Commissioner’s position.[128]

   [128] Applicant’s Closing Submissions [7]; Applicant’s SFIC 16, [5]; 17 [9], Applicant’s Objection T10 [20], [21].

5. I do not accept either party’s submissions. When interpreting a statutory provision, the scheme of the relevant provision in the Act, its context, extrinsic materials, and the purpose of the provision may be considered.[129]

   [129] Sections 15AA and15AB of the Acts Interpretation Act 1901 (Cth). Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 372-373. CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, 408.

6. Looking at the context of the ITAA 1997, the words harassment and discrimination are not defined, and they are only used once in the ITAA 1997, in paragraph 82-10(6)(d). The scheme of the provision at issue puts harassment and discrimination alongside other words in paragraph 82-10(6)(d) that relate to employment law claims (“unfair dismissal”, “personal injury” and relate to employment termination). I reject the Applicant’s position of an unconstrained definition, as the words must be interpreted with that context in mind. This is also supported by the Revised Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No.3) Bill 2012 (Cth) which provides examples focusing on employment law disputes.[130]

   [130] For instance, Revised Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No.3) Bill 2012 (Cth), example 5.6.

7. However, there is also nothing suggesting an actionable test (whatever that means), so I reject the Commissioner’s position. It is commonsense to say that it is unlikely a payment would be paid as compensation for personal injury, unfair dismissal, harassment, or discrimination unless there was some substance to a claim to that effect. This is supported by the Revised Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No.3) Bill 2012 (Cth) at [5.23] refers to “a genuine dispute.”[131] The wording of paragraph 82-10(6)(d)(i) sets out that test. Nothing more is needed. An additional test outside of the statutory words is not required.

   [131] The Commissioner does not dispute there is a genuine dispute.

8. The word “compensation” does not of itself reflect that a legal right is required, and I reject the Commissioner’s submission to that effect. Compensation merely means a payment for loss. In the context of the ITAA 1997 it is a word used many times and on each occasion in context, this is what it means.[132] The purpose of the provision at issue and the extrinsic material also supports this approach. The Revised Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No.3) Bill 2012 (Cth) provides at paragraph 5.35 that “A payment does not need to be made as a consequence of proceedings before a court in order to be compensation.” This clearly reflects that a legal right is not required for there to be compensation, as a legal right to compensation only arises where there is a court order. There is no requirement that Court proceedings even be filed before a payment is compensation as the provision requires “a genuine dispute” and this is something that can be evidenced in the absence of proceedings.

   [132] For example, ss 51-32, 51-33, 54.20, 70-115, 118-37 of the ITAA 1997.

9. Considering “harassment,” I accept the Commissioner’s Closing Submissions at [42(c)] that harassment includes sexual harassment and bullying. However, case law also demonstrates that harassment and bullying also can include victimisation – including being singled out, being left out of work meetings, disparaging statements, and, on occasion, depending on the circumstances, being asked to resign.[133] I accept that the Applicant can maintain that some of the material in the scheme of the second private ruling may arguably demonstrate harassment based on this case law.

   [133] State of Victoria v McKenna [1999] VSC 310. Hill v Minister for Local Government, Territories and Roads [2004] AIRC 394. Harley v Aristocrat Technologies Australia Pty Ltd [2010] FWA 62.

10. Considering “discrimination,” I accept the Commissioner’s Closing Submissions at [42(b)] that discrimination involves action due to an attribute of the Applicant – be it his racial or cultural background, age, marital status, sexuality, gender, religion, disability, political opinions,  family responsibilities, trade union activity as potential examples.[134] There is no evidence of this being an issue in this case and certainly no evidence of discrimination in the scheme of the second private ruling. I do not consider it further.

    [134] Section 7 of the Anti-Discrimination Act 1991 (Qld).

11. In the objection decision, the Commissioner added a new reason to the reasons in disallowing the objection that it adopted from the second private ruling. That new reason was that the Fair Work Commission claim was not an order to stop harassment, workplace bullying or discrimination.[135] The Tribunal accepts that is a relevant fact. However, depending upon the circumstances, the form of an applicant’s filing at the Fair Work Commission is not determinative of the nature of the payment.[136]

    [135] T2, 12 [15]-[16].

    [136] T3, 42.

12. As is outlined above at paragraph ‎110, in the first place, a filing at the Fair Work Commission is not required in order to find that paragraph 82-10(6)(d) of the ITAA 1997 is applicable, merely “a genuine dispute.” So, the weight of the nature of the Fair Work Commission claim cannot be significant.

13. More particularly, in this case the Applicant filed the Fair Work Commission claim to prevent the Employer from taking adverse action in circumstances where he had not been dismissed. The Applicant claimed coercion and undue pressure. In plain meaning there seems a degree of correlation between such claims and harassment, although that would need to be considered further at law. Events happened around the same time as the filing, which added additional potential elements and new potential grounds to the Applicant’s claim. The Applicant says he did not have an opportunity to claim discrimination or harassment until the conciliation at the Fair Work Commission and he raised it then.[137]  Of course, those facts are not in the scheme of the second private ruling, so the Tribunal cannot take that into account when considering the correctness of the second private ruling.

    [137] Applicant’s September Submissions [2].

14. I comment that there are also policy concerns from giving much weight to the nature of the Fair Work Commission claim. If the Commissioner relies upon reasoning that the form of the Fair Work Commission application equals the nature of the payment, well-advised applicants to the Fair Work Commission could be encouraged to file ‘everything including the kitchen sink’ style applications to protect themselves from the tax outcomes not being as they thought. This would be counterproductive to the resolution of disputes and the narrowing of issues before the Fair Work Commission.

15. I have concluded that there is a potential argument for the Applicant that there may have been harassment. However, I must now consider the evidence in the scheme of the second private ruling and determine whether the Applicant has met his burden of proof of demonstrating that the payment was principally for that. I have concluded that based on the facts in the scheme of the second private ruling that the Applicant has not met his burden of proof of demonstrating that the second private ruling was wrong.

16. This is for the reasons which follow:

    (a)While it is true that the payment was in order to settle all of the issues between the Applicant and the Employer, there is no evidence outlined in the scheme of the second private ruling that the payment was principally for harassment. There is some arguable evidence of harassment in the scheme of the second private ruling but there is nothing to demonstrate this was the main, chief or principal reason for the payment.

    (b)The scheme of the second private ruling sets out that the payment could have been principally for other matters. This may include (for instance) incentivising the Applicant to resign or what is specifically said in the Deed of Release.

    (c)The scheme of the second private ruling outlines that the payment was agreed by the Applicant and the Employer in the Deed of Release to be “in lieu of notice.” There is no evidence in the scheme of the second private ruling that the payment could not be “in lieu of notice.”

    (d)There is no evidence in the scheme of the second private ruling that the Deed of Release was entered into in circumstances of duress at law, or that might undermine the veracity of its wording, or that might suggest it did not reflect the real agreement between the parties.

    (e)The scheme of the second private ruling also emphasises that the payment was made as a consequence of the termination of the Applicant’s employment. That is sufficient to be an ETP.[138]

    [138] Australian Taxation Office Taxation Ruling TR 2003/13 Income tax: employment termination payments (ETP): payments made in consequence of the termination of any employment: meaning of the phrase ‘in consequence of’. Le Grand v Commissioner of Taxation [2002] FCA 1258.

17. Given the above conclusions which are in part a direct result of the Tribunal being limited to the scheme of the second private ruling, the Applicant cannot succeed before the Tribunal. The Applicant may wish to consider whether to file an objection to the assessment. The Tribunal expects any such objection would be late. The Applicant would need to consider the rules surrounding the Commissioner’s discretion to accept a late objection and make submissions explaining the reason for lateness. Factors to consider are helpfully summarised in Practice Statement Law Administration PS LA 2003/7 How to treat a request to lodge a late objection available on the Commissioner’s website.

18. The Tribunal finally records a reaction to the submissions in the Commissioner’s Closing Submissions which rely on Stark v Federal Commissioner of Taxation [2023] FCA 1523 and Dibb v Commissioner of Taxation [2004] FCAFC 126.[139] These submissions are to the substantive effect that unless there is an admission of liability by the Employer or some form of allocation of the payment in the Deed of Release to the Applicant’s claims (without an admission of liability), the Applicant would be unable to demonstrate that a payment is principally compensation for the matters specified in paragraph 83-10(6)(d). The Commissioner’s Closing Submissions appropriately note that both of those cases do not focus on paragraph 82-10(6)(d) of the ITAA 1997 but deal with payments said to be capital in nature and different legislative provisions (although admittedly a different part of Division 82).[140] I agree with the Commissioner that the analysis in those cases would fall to be considered in this case had there been facts in the scheme of the second private ruling that resulted in the Tribunal examining whether the words in the Deed of Release reflected the real agreement. That is, of course, not the position in this case.  I also agree that the Applicant would need to consider these cases when seeking to say what the payment was principally for.

    [139] Commissioner’s Closing Submissions [25]-[30].

    [140] Commissioner’s Closing Submissions [30].

19. I have not reached a final position as I do not need to consider this point, I record that there may be a reason for a different approach to be adopted in the context of paragraph 82-10(6)(d). That reason relates to the purpose of the provision as outlined in the Revised Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No.3) Bill 2012 (Cth) and referred to above. If Court proceedings are not required for the provision to potentially be applicable (merely a genuine dispute), allegations of matters such as harassment are relevant, and there would not be a high likelihood of a specific allocation of compensation to the matters specified in paragraph 82-10(6)(d) in any settlement between the parties for any such allegations.

20. I acknowledge that it is always going to be easier for a hypothetical applicant to meet its burden of proof and demonstrate that a payment or a portion of that payment is compensation for the matters in paragraph 82-10(6)(d) if a settlement deed specifies an amount attributable to those matters. However, I am not of the view it is going to be realistic to say that this is the only circumstance where paragraph 82-10(6)(d) can apply. There would be a significant evidential burden[141] on a hypothetical applicant to satisfy the principally test, but, depending upon the circumstances, that may be able to be satisfied. The final determination of this issue in the context of paragraph 82-10(6)(d) is for another case to consider.

    [141] Case 5 [2014] AATA 535; Case 7 [2010] AATA 912; Gerard Cassegrain and Co Pty Ltd v Federal Commissioner of Taxation [2007] FCA 415; Kort v Federal Commissioner of Taxation [2019] AATA 336.

    CONCLUSION

21. The Commissioner’s decision is affirmed.

Date of hearing:	20 January 2025, 23 January 2025, and 14 February 2025
Applicant:	Self-represented
Counsel for the Respondent:	N Derrington
Solicitors for the Respondent:	Australian Taxation Office, Litigation and Legal Services