Redundancy and the ATO ... Rolf do not look!

[lizzie]

Hi folks ... I have been searching the ATO website and cannot seem to find and answer for this.

Hubby has been formally offered a package and finishes up in less than 3 weeks. YAY!

He is now looking for a job - although it's not like we're going to starve or anything if he semi-retired - he likes the challenge and rewards of working.

He's put his network feelers out, and potential positions are coming out of the woodwork ... but ... one position is with the very lage company he is currently employed by - and getting retrenched from - but in a completely different section completely different job description, under completely different conditions (part time), although still in same city. If he does, he would go back under contract thru a company we own.

Soooooo - the question is - how does the ATO look at being retrenched, given an almost-no-tax payout due to length of service, and then going back to work at same company, different division, as a contractor?

Or do the ATO not care as long as the position he was in "is" redundant and he mets company guidelines on re-employment?

Can anyone point me to the relevant ruling?

 

[coastymike]

http://www.ato.gov.au/superfunds/content.aspx?doc=/content/12425.htm

BUT NOTE

tax free amount of bona fide redundancy WILL NOT APPLY unless

"the employer does not have any agreement with another person to re-employ the employee"

So remaining with the company will cost you A LOT in tax.

 

[lizzie]

tax free amount of bona fide redundancy WILL NOT APPLY unless

"the employer does not have any agreement with another person to re-employ the employee"

So remaining with the company will cost you A LOT in tax.

I saw this ... but I read it as the agreement to re-employ must not be in place (either written or verbally) prior to termination.

So, if there was no agreement or knowledge within the organisation, prior to his leaving, of his intention to apply for this job - ie, he wouldn't apply for the job until after termination (and he may not get it anyhow) - how do the rules apply then?

Or, because he is aware of the job prior to termination, and is considering applying afterwards, is that not okay - even if there is no knowledge within the company of his intentions?

 

[coastymike]

lots of case law and time for a tax lawyer experienced in the matters to have a look for you. seen many people get this one wrong. try andrew noolan at schurgott noolan www.sbnlawyers.com.au

 

[lizzie]

the exact wording on the ATO website is - at the time of termination:

"that the employer does not have an agreement with another person to re-employee the employee"

Damn vague ATO ... but if it's to risky, then he'll just pick up one of the other job on offer with a different company altogether.

 

[Perchy]

Why not call up the ATO to seek advice? Its free..

 

[Aaron_C]

Why not call up the ATO to seek advice? Its free..

Because it will be wrong?

 

[jaycee]

http://www.ato.gov.au/superfunds/content.aspx?doc=/content/12425.htm

BUT NOTE

tax free amount of bona fide redundancy WILL NOT APPLY unless

"the employer does not have any agreement with another person to re-employ the employee"

So remaining with the company will cost you A LOT in tax.

If you are a PAYG employee take a redundancy and stay employed, as a PAYG employee then you have not taken a redundancy

I think the devil will be in the detail lizzie, but the answer will be pretty black ^& white



If however, you get terminated as a PAYG employee, you are allowed to work as a contractor - by contractor, I mean different conditions, not being a PAYG employee and whatever else I don't know how to explain

Well so it appears to me the last 1`7 yrs watching things around me

But then again, I also wouldn't have thought ringing the ATO would be the stupidest thing to do when looking to find out ATO rules

 

[wylie]

I would ring the ATO, and if the answer is favourable to you, then I would be asking for that in writing.

 

[lizzie]

The reason I'm reluctant to ring is that

a) the wait on hold can be excrutiatingly long
b) I will need to be transferred to 3 different sections
c) four different people will give you four different answers
d) often English is not their first language and can be very difficult to understand.

If it was in black and white on the website, I'd be more inclined to believe it. Because the wording appears vague, phoning will only muddy the waters more - in my past experience with the ATO.

 

[dan c]

the exact wording on the ATO website is - at the time of termination:

"that the employer does not have an agreement with another person to re-employee the employee"

Damn vague ATO ... but if it's to risky, then he'll just pick up one of the other job on offer with a different company altogether.

The longer the gap between leaving and contracting, the more chance you will have of showing that there was no agreement in place at the time of termination.

 

[jaycee]

The reason I'm reluctant to ring is that

a) the wait on hold can be excrutiatingly long
b) I will need to be transferred to 3 different sections
c) four different people will give you four different answers
d) often English is not their first language and can be very difficult to understand.

If it was in black and white on the website, I'd be more inclined to believe it. Because the wording appears vague, phoning will only muddy the waters more - in my past experience with the ATO.

I think it is black & white on the website.

Your hubby's employment conditions will change if he does not continue as a PAYG employee, so it's ok. Your husband will continue to be a PAYG employee so it's not OPM to be paid out as if he;s lost his PAYG job

But, despite my arrogance above, if I was actually in your position I would ring the ATO and find out - but then again,the amount a redundancy is worth to me is a lot compared to what I have, so I wouldn't be that cut up about paying the price of waiting on the phone etc

 

[wylie]

The reason I'm reluctant to ring is that

a) the wait on hold can be excrutiatingly long
b) I will need to be transferred to 3 different sections
c) four different people will give you four different answers
d) often English is not their first language and can be very difficult to understand.

If it was in black and white on the website, I'd be more inclined to believe it. Because the wording appears vague, phoning will only muddy the waters more - in my past experience with the ATO.

LOL. That all rings so true. I have on occasion called one branch of the ATO and got an answer and called the other one to had the complete opposite answer .

 

[lizzie]

But, despite my arrogance above, if I was actually in your position I would ring the ATO and find out - but then again,the amount a redundancy is worth to me is a lot compared to what I have, so I wouldn't be that cut up about paying the price of waiting on the phone etc

hahaha - you weren't arrogant ... it was the "4 different people with 4 different answers" that was the clincher for me. Experienced it to often, when trying to find out something from the ATO, that I am now disinclined to believe what is "said" over the phone ... which then turns into a massive time wasting exercise.

 

[jaycee]

hahaha - you weren't arrogant ... it was the "4 different people with 4 different answers" that was the clincher for me. Experienced it to often, when trying to find out something from the ATO, that I am now disinclined to believe what is "said" over the phone ... which then turns into a massive time wasting exercise.

Unlike the exercise here ?

I've found when I rung the ATO over the last couple of years, especially where my question was simple & straight forward, I got simple & straightforward help.. reasonably quickly....

I don't like waiting in queue's either, but if that's the price that has to be paid.....

How else are you going to get an answer if not from the horse's mouth ? we certainly aren't providing you with consistent advice

 

[coastymike]

Jaycee

Because those of us experienced in tax law and dealing with the ATO know that the answers provided by the helpline are in many cases not correct. To be fair to the ATO at times they don't have all the facts and so the answers they provide are sometimes simple without taking into account the variables. However when you get an audit and found to be wrong it may assist in reducing your penalties. But then again Sinclair v FCT held the view that as the individual had not sought advice from a tax lawyer then they were not entitled to a reduction in penalties.

I don't think you are arrogant Jaycee just merely expressing a view based on your limited tax knowledge and experience. Nothing wrong with that.

 

[Macca]

Hi Lizzie,

Perhaps your accountant could get some sort of clarification in writing, that would at least give some protection if ever queried.

 

[Lily House]

Hi Lizzie,

Congrats on your hubby's redundancy offer.

Different issue, but it would be worth talking to the HR people in the company as well, to see what their rules are regarding employing people after redundancy.

My hubby took a voluntary redundancy a couple of years ago. He worked for a large Aust company. Their policy was that he could not be employed there again for a period of two years - and not even as a contractor for a period of one year.

Don't reply on the individual unit that wants to employ your hubby - if it is a company wide policy, they will have to follow the rules, even if they don't know about them. Might not apply in your case, but we were surprised at the time, after hearing so many stories of people going back as a contractor after redundancy...

All the best.

Caroline

 

[lizzie]

Unlike the exercise here ... we certainly aren't providing you with consistent advice

Which is why I asked this bit ...

"Can anyone point me to the relevant ruling?"

Was after the ruling on the website rather than opinions ... but seems both the ruling and opinions are vague and open to interpretation.

Ah well ... might just be safer to move on completely as the tax part IS big dollars.

 

[jaycee]

I think you guys are right.


It soundslike it should be a straightforward question but it's not going to be....

I hate dealing with these sort of questions sometimes where I know the person on the other end of the line is going to get confused and then not understand why I'm still unsure.