I have received an estimate for a genuine redundancy payment from my employer. There are various payment components in the redundancy estimate. One component of the redundancy estimate includes a Payment in Lieu of Notice (PILN) which does not include the superannuation loading.
I have queried this with my employer on the basis of all the documentation on the ATO website and a variety of other reputable websites such as employer organisations and legal firm all of which clearly and unambiguously indicate that superannuation is payable on PILN in the context of a redundancy.
However, my employer has indicated that following discussions with the ATO the following was confirmed
· A genuine redundancy payment may include a number of components, PILN being one of these.
· Any payments that meet the conditions of a genuine redundancy are tax-free up to a limit depending on your years of service with your employer.
· The PILN component of a redundancy payment is tax-free as it is not considered to be OTE, nor does it attract any superannuation payment.
· The employer is treating genuine redundancies correctly in not applying superannuation considerations.
· The PILN on other forms of separations from an employer, such as a dismissal, do attract tax as they are treated as OTE.
I have highlighted above that a key considerations in this matter is that the PILN payment is tax-free and is not considered to be OTE. Clearly, the above information provided by my employer does not appear to be aligned with all the publicly available information that the ATO provides in their website not to mention the advice they have provided to individual taxpayers via the ATO Community website. It also appears that both industry groups and employment legal firms have an incorrect understanding of the tax law and practice in regards to this matter.
Accordingly, I am seeking your advice to try to reconcile these different interpretations of tax law and practice.
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