Taxation Issues Case Study Of Bond

Background of the case is that Mr. Bond who is an air company pilot hired by Qantas. For this there was a prerequisite by the Civil Aviation safety authority to have a license to fly and a recent medical certificate that was proper to licence. He has that licence for many years but unfortunately in the year 2005 October 6 he was diagnosed by the neuropsychological failure.

For this reason he was suspended from the job. In between 2005 and 2007 he has also applied for many job roles like ground roles and staff and flight captain, but that application was not successful. In 2007 Mr. Bond was diagnosed by cognitive disorder and in March 2007 Mr. Bond licence were cancelled by civil aviation safety authority. At this time Qantas informed Mr. Bond regarding the Loss of licence policy. After the completion of all formalities Mr. Bond received a letter by Qantas regarding the claim approval by the insurer through letter of approval.

Now the query in this case rises that whether the insurance payment made to Mr. Bond was in real an employee termination payment under section 82-130 after he has lost his licence due to his medical conditions failure.(Federal Register, 2017).

Under section 82 -130 the provision says the following regarding employment termination employment:-

A payment is said to be an employment termination payment if it is :-

• Received by you,
• In regard to the termination of your employment. Or,
• After other person death or as a result of the termination of the

Other person’s employment.

• It is received not far along than 12 months after that termination,
• It is not the compensation mentioned section 82-135.

Section 82-135 states what kind of payment does not belong to employment termination payment:

A capital disbursement for or in respect of individual injury to you so far that the sum is rational having regard to the nature of personal damage and its likely to effect on your capability to develop income from individual effort.

If the disbursement is relieved by section 82-135 then it is not liable to tax.

Here in this case the suggestions which was placed forward by Mr. Bond were as follows:

• The loss of licence payment is not an employment termination payment as it has been received in respect of loss of licence and not because of his termination from employment.
• If the payment for loss of licence received was the result of termination of employment then it will be considered as capital payment and will be in regard to the personal injury and which in return relieved from the exclusion to the definition of employment termination benefit.

• Payment of loss of licence if not considered as employment termination benefit then it was matter to fringe benefit tax in Qantas hands and consequently it is neither reckonable as income nor chargeable as capital gain.
• Payment of loss of licence if not employment termination payment and also does not comes under the purview of fringe benefit tax , then it was not an allowance, gratuity compensation, benefit etc in regard to employment which comes under section 15-2, initially because it was paid in regard to the loss of licence of Mr. Bond. Instead of repayment for his service but otherwise because section 15-2 only taxes normal earnings.

Section 15-2 states that:

Assessable income also include the amount of allowances like gratuity, compensation, benefits, bonuses, and premium, for or in regard to employment or services provided.

Hence following case involves the big question whether the payment made by Qantas to Mr. bond for loss of licence constitutes employment termination payment and should by assessable as income.

Sections that were breached in the case:

Questions of law that were raised in the amended appeal was whether:-

• The court has misapprehended the section 82-130 in judgement that the loss of licence payment was an employment termination payment by applying the wrong test of determination of the relation of between loss of licence payment and the cessation of service.

• Court has misapprehended section 82-135 of ITAA 1997.
• Court has misapprehended section 15-2 of the ITAA 1997 by judging that it may apply to amount of capital nature.
• Court has misapprehended the Qantas Airways Limited Flight crew certified arrangement  and scottish re insurance policy in judging that they have provided applicable association between the loss of  license payment and payment of termination of employment for the perseverance of explanation of employment termination payment under section 82- 130 under income tax assessment act 1971.

Now let us discuss where the court has mistakenly construed the provisions.

• The court misapprehended one of the clause in SHCA in concluding that it delivered a significant connection in the middle of loss of licence payment and termination of employment.
• The court misapprehended in its edifice of the agreement between insurance company and Qantas by deciding that the termination of employment as a pilot was a prerequisite to payment and in that sense payment monitored on from the expiry of employment and had the essential link with it and that the loss of licence payment was acknowledged by the applicant in concern of the termination of his employment with Qantas.
• The court should have judged that loss of licence payment was completed under Scottish re insurance policy as a outcome of the forfeiture of pilot licence and that neither the SHCA nor the Scottish Re-insurance policy complete dissolution of employment a precondition for the forfeiture of certificate payment.
• The court misapprehended in it its judging of section 82-130 of the ITAA 1997 in finding that loss of licence compensation was an service dissolution compensation because the mutual arrangements consider that pilot’s service will dismiss as the outcome of the pilot licence being annulled or not reintroduced and the pilot getting a loss of licence compensation or antedate the cessation of service of pilot who gets a loss of licence disbursement.
• The court if had not misapprehended the section 82-130 which require unpremeditated association among forfeiture of permit compensation and cessation of service imbursement then the court have establish that forfeiture of licence payment received by the Applicant was not an service cessation payment under section 82-130 of ITAA 1997.
• The court also misapprehend the law by not successfully contemplating at all whether forfeiture of licence payment was in reverence of or for in association directly or indirectly to service or services giving within the connotation of section 15-2(1) of ITAA 1997.

The court ought to have establish that forfeiture of licence payment is out of section 15-2 because it was not in reverence of or for in association straight away or indirectly to service or services given within the connotation of section 15-2(1) of ITAA 1997.

• The court also misapprehended section 15-2 of ITAA 1997 by concluding that section 15-2 is not restricted to sum of an revenue nature but also disputably comprises an sum of a capital nature.
• If the court have correctly interpreted section 82-130 of ITAA 1997 and had in the approved manner interpreted SHCA and Scottish re insurance policy and treated the deed of proclamation as unenforceable insofar as it tried to differ adversely the applicant privileges under SHCA it would have unavoidably have establish that the payment gets by an applicant was not an service cessation payment under section 80-130 under ITAA 1997 instead it is loss of licence payment.

So from this discussion we will be able to understand the points of breaches or mis interpretation which would have been avoided by correct finding.

Analysis of the court or tribunal decision:

In this case mention was also made to section 170LT of the workplace relation act 1996 dealing in attesting an arrangement to the definition of fringe benefit under section 136(1) of fringe benefit tax assessment act 1936.

The court misapprehended in ruling in determining that forfeiture of certificate payment received by the applicant is not fringe benefit  as defined under section 136(1) of the FBTAA 1986. For the reason that,

The court ought to have establish that loss of permit payment is not service cessation compensation hence should not be excluded from the definition of fringe benefit under FBTAA act 1986 (Common welath Cosolidated Acts, 2017).

After finding that the loss of licence payment is not sum of capital nature aimed at or in reverence of personal injury to a person within the meaning of section 136(1)(m) , the court misinterpreted in concluding that loss of licence payment does not include fringe benefit within the meaning of section 136(1) of FBTAA 1986 . The court misjudged in law by waning to discover that the forfeiture of authorisation payment is fringe benefit u/s 136(1) of the FBTAA 1986 Act, hence the section 23 L of ITAA 1936 indulgences the loss of licence payment as non assessable and non-exempt in income in the hands of assesse (Federal Register , 2017)

In this case judge has passed the judgement that loss of licence payment was a employment termination payment and which has been elicited by inadequate proof of perfect medically fit certificate of medical tests by Mr. Bond.

The conclusion and the judgement was passed on the basis that the loss of licence payment was not protected by section 82-135 that is the reimbursement was not made in contemplation of any personal injury.

The judge also took the help from the guidance from Scully in national court where it was resolute that any payment made in regard to grievance must encompass some kind of dimension or deviousness in order to decide the loss of member of staff income.

The court decision was that the payment for loss of lucence should be treated as employment termination payment because section 80-132 applies to it that is if the payment is received by the applicant as a result of result of termination of the employment, and Mr. Bond was not successful in its objection. The court identified the issues that were raised by Mr. Bond but decided unfavourably decided to Mr. Bond.

The appeal was dismissed on many grounds and which were incompetently represented by Mr. Bond and the court has not misapprehended the question of law that will question the final conclusion.

Section 82-135 says that sum which is received will not be employment termination payment if this is received in regard to individual damage as far as it is rational and is probable to influence on the ability to develop earnings from personal effort (Australain Government, 2017)

Conclusion:

The case can be summarised as follows In March 2015 Federal court concluded that one of the pilot of the Qantas received the payment in regard to injury or there were something else or more substantial than reimbursement. Mr. Bond injury was associated with enhancing medical issues hence his licence to fly was cancelled and he got payment for loss of licence which was the agreed policy of the company. Now the issue rises that the payment which was made to Mr. Bond of $500000 was reasonable compensation in respect of his injury or whether it is not reasonable .the case had the capability to explore lengthy widened process of dispute which involves essential belief of human biology. The answer to these question by the judge in this case was not positive and in this case there was the highest word record of the usage of the term LOL that is loss of licence. In brief Mr. Bond did not receive his service cessation payment for any wound or injury continued while working. In fact he received that payment in respect of his retirement which otherwise also he would have received in spite of the fact that he was injured or not.

The question arises in this case was that the ultimate payment to Mr. Bond is whether or not an employment termination payment under section 80-132 after he lost his licence because he has failed in medical tests for two years continuously.

The court concluded the case against Mr. Bond and his appeal was dismissed and it was concluded that loss of licence payment is an employment termination payment.

References

Australian Government(2017) BOND V FC [online] Available at: https://www.ato.gov.au/law/view/document?data-src=hs&pit=99991231235958&arc=false&start=31&pageSize=10&total=952&num=9&docid=JUD%2F2015ATC20-499%2F00001&dc=false&tm=and-basic-weeks%20v%20FC%20of%20T [Accessed  9^th April. 2017].

Federal Register (2017) Income tax assessment [online] Available at:        https://www.legislation.gov.au/Details/C2004A05138 [Accessed  9th April. 2017]

Federal Register (2017) Fringhe Benefit Tax assessment [online] Available at: https://www.legislation.gov.au/Details/C2014C00048 [Accessed  9^th April. 2017].

Common wealth consolidated Acts(2017) Fringe benefit tax [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/fbtaa1986312/ [Accessed  9^th April. 2017]

Australian Government (2017)Income tax assessment [online] Available at: https://lawlex.com.au/tempstore/consolidated/5495.pdf [Accessed  9^th April. 2017]