If a former employee (along with other employees) was made redundant in July 2016 due to an organisational restructure, are they able to return to work for the same employer in the same tax year either as an employee or contractor?
A payment will qualify for concessional tax treatment as a genuine redundancy payment if it is made in consequence of an employee’s dismissal from employment because of genuine redundancy and the conditions below are satisfied:
- the employee is dismissed before the earlier of his/her 65th birthday, or the employee’s normal date of termination if the employment would have been terminated on attaining a particular age or the completion of a period of service
- if the dismissal was not at arm’s length — the payment must not be greater than the amount that could reasonably be expected to be made if the dismissal were at arm’s length
- at the dismissal time, there was no arrangement between the employee and the employer, or between the employer and another person, to subsequently employ the employee.
As can be seen, there is no time limit specified as to when a former employee that has been made redundant can be re-employed.
The only condition is that, at the dismissal time, there was no arrangement in place to subsequently employ them as per the third dot point above.