Nobody disputed the redundancy was genuine. The fund deed decided the tax anyway.
Your client is a sprinkler fitter. Made redundant after nearly two decades in the industry. His employer contributed to an industry redundancy fund the entire time. He receives $78,000 from the fund and expects the genuine redundancy tax-free threshold to apply.
The ATO says no. The Tribunal agrees. Hardy and Commissioner of Taxation [2026] ARTA 528.
What happened
Mr Hardy was a sprinkler fitter made redundant by Firesafe in May 2024. His employer had contributed to Reddifund, a WA construction industry redundancy fund, since 2005. On cessation, Reddifund paid Hardy his full account balance of $78,188 as an employment termination payment [14].
Hardy claimed the payment was a genuine redundancy payment under s 83-175(1) ITAA97 and sought the tax-free threshold. The Commissioner disagreed. Hardy, self-represented, took it to the Tribunal.
The statutory test
Section 83-175(1) defines a genuine redundancy payment as so much of a payment received on dismissal by reason of redundancy as exceeds the amount that could reasonably be expected to be received on voluntary termination at the time of dismissal.
The critical question was whether Hardy would have received the same payment had he voluntarily resigned. The Reddifund Deed defines “redundant” broadly. It covers any employee who has ceased providing labour and has not been offered re-employment by a participating employer [42, 45]. That includes both genuine redundancy and voluntary resignation.
The Tribunal found that if Hardy had resigned voluntarily in the same circumstances, Reddifund would have paid the identical amount [54, 60]. The payment did not exceed what he could reasonably expect on voluntary termination. It failed the s 83-175(1) test.
Hardy argued he had received a job offer by 12 June 2024 which would have disentitled him to a voluntary resignation payment under the Deed [55]. The Tribunal rejected this. Hardy never disclosed those offers to Reddifund, and the fund paid based on his May 2024 statutory declaration stating he had no offers [56-58].
Why this matters
Hardy was genuinely redundant. Nobody disputed that [26]. But the tax-free threshold did not apply because of how his fund was structured.
The Tribunal acknowledged the inequity. Workers in the Protect Severance Scheme, a fund structured to pay only on genuine redundancy, receive the tax-free threshold [62]. Workers in Reddifund do not. Same industry, same redundancy, different tax outcome purely because of how the fund deed is drafted.
The worker does not choose the fund. The employer does. If you advise construction industry clients, check the fund deed. The structure of the redundancy fund, not the circumstances of the redundancy, determines the tax outcome.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.