Redundancy and Tax.

[tekme]

Late October 2014 I was consulted about my position was at risk of being redundant.
One month later, Nov 2014 , the company officially handed my Notice of Termination now declaring that my position was redundant.

They gave me a very long notice June 26th 2015, reason being work moved offshore and required the existing staff to train up overseas people so they can do the job and thus making us redundant also known as golden cuffs.

All good so far.

4 months later, April 2015, the company decides that it is retracting the Termination saying that my position is not redundant anymore due to other staff in another team resigning hence available headcount.

But it has been 4 months and I have already started applying for other employment and in progress for interviews...etc..and have also planned usage for my package.

I have acted and planned based on their Notice of Termination but now they have retracted it and I refuse to accept the redeployment given the length of time it has taken for redeployment and because I have already taken measures applying for other jobs

They have offered to pay the severance of 12 weeks as mitigation but they have advised it would be not a genuine redundancy and would be taxed at the higher rate.


So my question is am I entitled to the full Redundancy taxed at the 0 tax rate or must it be taxed at the higher lump sum of i think 30% or there abouts even though it was a genuine redundancy just merely 2 weeks ago.

Many thanks!

[Greg Schmidt]

Hi Tekme,

Broadly speaking, a redundancy payment is (somewhat inadequate) compensation for losing your job and source of income. Now that redeployment is possible, because an internal transfer opportunity has opened up, your employer is doing the right thing in offering redeployment to you.

However, recent case law (within the last twelve months, I think, although I can't remember the specific case offhand) supports your view that your employer can't unilaterally withdraw your termination notice. You actually are entitled to rely on the employer's termination notice and make commitments to potential employers, etc. You could give your agreement to your employer to withdraw the termination notice, but you're not obliged to. Your employer presumably has acknowledged this in offering to pay you a 12 week termination payment regardless of the changed circumstances.

However, your employer would be in breach of taxation laws if it falsely declared to the ATO that you were entitled to a special tax treatment on your termination payments when in fact you were not "genuinely redundant" on the date of your termination. If you do cease employment now and receive a 12 week termination payment, this will most likely be taxed as an Employment Termination Payment, not as an exempt redundancy payment.

But just as your employer has reacted to the changed circumstances, so can you. You say that you "started applying for other employment" and "have also planned usage for my package". On this basis, you're probably not legally, morally or financially committed to anything new - so you have the option to remain with your current employer. Or, you can cease employment, knowing that you'll get more than simple resignation benefits, but it won't be tax-free.

Greg

[tekme]

Many Thanks Greg, I appreciate your informative response into this very messy situation for me.