FBT Q&A – Car transferred to employee as part of redundancy package

Question

An employee was made redundant and as part of his redundancy package there was the transfer of ownership of a vehicle to him with an approximate market value of $23,000. Please provide guidance as to correct treatment of this benefit.

Answer

As the car was agreed to be transferred as part of the employee’s redundancy package, the value of the car at the time of transfer forms part of the employee’s employment termination payment (ETP).

If the employee’s ETP qualifies as a genuine redundancy payment, and the total value of the employee’s payment falls within the genuine redundancy thresholds, it will be tax-free in the employee’s hands.

Otherwise, the value of the car is included in the ETP and will be assessed at the relevant ETP rates and PAYGW will be required to be deducted and remitted to the ATO.

For more guidance on the tax issues with redundancy payments, take a look at our March 2019 TaxEd Update article on genuine redundancy payments.