In a recent matter, an employee was seeking recourse regarding terms of a Deed that were agreed to between the parties upon cessation of employment.
The employee had agreed to a settlement amount which comprised various amounts, on the basis that a large percentage of the amount was to be characterised as a redundancy payment for tax purposes.
The employer agreed to this and drafted a proposed Deed which the parties executed shortly after.
A few months later, upon completion of the former employee’s tax return by her accountant, she realised that the settlement amount had in fact been characterised as a 3 months’ ex-gratia payment instead of a redundancy which had severe tax implications for her.
The key take-away from this case is that parties must always obtain their own legal advice prior to signing any document, but particularly, a Deed of settlement to ensure the terms proposed in the Deed reflect those that the parties had agreed to prior to execution of the Deed.
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Disclaimer: Laws are subject to change, and the information provided is general in nature. Readers are encouraged to seek professional legal advice tailored to their specific circumstances to ensure accurate and relevant guidance.