The case concerned the meaning of "employment termination remainder" and the correct method of calculating the tax payable by a taxpayer who received an employment termination payment.
The Federal Court held that the definition of "employment termination remainder" (ETR) in s 3(1) of the Income Tax Rates Act 1986 (ITRA) places a cap on the amount of taxable income that can be the ETR. The ETR cannot be greater than the taxable income. The Federal Court also said that the relevant provisions were "clear and unambiguous".
The Federal Court's decision confirmed the Commissioner's interpretation of the definitions of "employment termination remainder" and "ordinary taxable income" in the ITRA.