Airservices Australia - early retirement scheme 2021
Please note that the PDF version is the authorised version of this ruling.
|Table of Contents||Paragraph|
|What this Ruling is about|
|Who this Ruling applies to|
|When this Ruling applies|
|Appendix - Explanation|
Relying on this Ruling
This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953.
If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling.
7. Accordingly, so much of the payment received by an eligible employee that exceeds the amount that could reasonably be expected to be received by the employee in consequence of voluntary termination of their employment at the time of the retirement will be an early retirement scheme payment.
10. The COVID-19 pandemic has resulted in a significant reduction in air traffic movements in Australia and internationally. The reduction in air traffic has had a significant impact on Airservices' financial performance and operations. It is anticipated that the volume of air traffic movements in Australian airspace may not return to pre-pandemic levels until 2025.
11. Airservices is considering the composition and nature of its staffing profile to help it plan for its future needs and is undertaking various measures to reduce and rationalise the size of its workforce.
12. Airservices has identified two cohorts of operational employees who are close to retirement age and are likely to retire before 2025 (that is, before air traffic movements return to pre-pandemic levels).
- employees working in Air Traffic Control (ATC) and covered by the Airservices Australia (Air Traffic Control and Supporting Air Traffic Services) Enterprise Agreement 2020-2023 (ATC EA) or Airservices Australia (Air Traffic Control Line Manager) Enterprise Agreement 2014 -2017 (ALM EA) (together, the ATC Cohort), and
- employees working in Aviation Rescue and Fire Fighting (ARFF) and covered by the Airservices Australia (Aviation Rescue and Firefighting) Enterprise Agreement 2018-2021 (ARFF EA).
14. Airservices is seeking to operationalise and change the nature of its workforce by using the current decrease in air traffic to retrain and replenish its workforce within these cohorts before air traffic returns to pre-pandemic levels.
15. With respect to the ATC Cohort, a new integrated civil and military air traffic management system (known as CMATS) is expected to be commissioned in or around 2025. This advanced technology will require employees to acquire new skills and abilities to maximise the potential of this new technology.
16. With respect to the ARFF cohort, Airservices has identified that it is comprised of predominantly long-standing employees. Given the physically demanding nature of the work which is inherently required as part of a number of ARFF roles, and consistent with Airservices' objective to change the profile of its workforce, Airservices is seeking to retrain and replenish its workforce while air traffic is substantially reduced.
17. Under the Scheme, Airservices will provide an incentive to employees who are close to retirement to bring forward their retirement. This will enable Airservices to employ, train and develop new people to replace those who have retired by the time air traffic returns to close to pre-pandemic levels. This will allow Airservices to realign the profile of its workforce during a period when air traffic is significantly reduced.
- as at the commencement date of the Scheme are permanent employees covered by
- for the ATC cohort - the ATC EA or the ALM EA
- for the ARFF cohort - the ARFF EA, and
- are aged 56 years of age or older as at 30 June 2021, and
- will not have reached their pension age (as defined in subsection 23(1) of the Social Security Act 1991) as at the date of their retirement.
- employees engaged for a specified term or for a specified task
- casual employees
- employees with a formal written arrangement in place that will result in the termination of their employment on a specified date before 31 December 2022.
20. Following approval of the Scheme, eligible employees will be invited to submit an expression of interest to participate in the Scheme. Employees will have a limited period in which to submit an expression of interest.
22. Airservices will make a formal offer of early retirement to each eligible employee who expressed interest in retiring under the Scheme. The offer will specify the retirement date on which an employee will retire under the Scheme, if the offer is accepted. Employees will have a limited time to accept or decline the offer to retire under the Scheme.
23. Employees who accept an offer to retire under the Scheme will terminate their employment (through resignation) on their retirement date. Employees will terminate their employment and receive payment by no later than 30 June 2022.
24. Employees who retire under the Scheme will receive a lump sum payment equivalent to the amount of severance pay that the employee would be entitled to under the ATC EA, ALM EA or ARFF EA (whichever is applicable) if they had been made redundant.
- a payment equivalent to four weeks' salary for each of the first five completed years of service and three weeks' salary for each subsequent completed year of service, plus a pro rata payment for each completed month of service since the last completed year, to a maximum of 75 weeks' salary, and
- a payment in accordance with the following table
|Years of continuous service||Amount payable|
|Not more than one year||One week's salary|
|More than one year but not more than two years||Two weeks' salary|
|More than two years but not more than three years||Three weeks' salary|
|More than three years but not more than five years||Four weeks' salary|
|More than five years||Five weeks' salary|
- a payment equivalent to one month's salary for each completed year of service with Airservices or any of its predecessors to a maximum of six months' salary, and
- a payment equivalent to three months' salary.
- a payment calculated as follows
- four weeks' salary per year for the employee's first five years of service, plus
- three weeks' salary per year of service thereafter, and
- the payment will be calculated on a pro rata basis for each completed month of service, and
- the maximum payment is 75 weeks' salary, and
- a payment in accordance with the following table
|Years of continuous service||Amount payable|
|Less than one year of service||One week's salary|
|Between one and two years of service||Two weeks' salary|
|Between two and three years of service||Three weeks' salary|
|Between three and five years of service||Four weeks' salary|
|More than five years of service||Five weeks' salary|
28. Each of the enterprise agreements contains Early Retirement Benefit provisions which are separate and distinct from the operation of the Scheme. Any benefit paid to an employee upon cessation of their employment under an Early Retirement Benefit provision of a relevant enterprise agreement does not form part of the payment made under the Scheme.
30. Employees who terminate employment under the Scheme will receive payment in lieu of their accumulated (but unused) annual leave and long service leave where applicable. However, these entitlements do not form part of the payment made under the Scheme.
Commissioner of Taxation
7 July 2021
|This Explanation is provided as information to help you understand how the Commissioner's view has been reached. It does not form part of the binding public ruling.|
|Table of Contents||Paragraph|
|Requirements for an early retirement scheme||36|
|All employees within a class approved by the Commissioner may participate in the scheme||38|
|The employer's purpose in implementing the scheme is to rationalise or re-organise the employer's operations in a way approved by the Commissioner||42|
|The scheme must be approved by the Commissioner prior to its implementation||45|
|Other relevant information||48|
A scheme is an early retirement scheme if:
(a) all the employer's employees who comprise such a class of employees as the Commissioner approves may participate in the scheme; and
(b) the employer's purpose in implementing the scheme is to rationalise or re-organise the employer's operations by making any change to the employer's operations, or the nature of the work force, that the Commissioner approves; and
(c) before the scheme is implemented, the Commissioner, by written instrument, approves the scheme as an early retirement scheme for the purposes of this section.
These three requirements are considered in paragraphs 38 to 47 of this Ruling.
40. The Commissioner considers that, for the purposes of paragraph 83-180(3)(a), this is an appropriate class of persons for the Scheme to be offered to. In approving this class of employees, the Commissioner has considered the nature of the rationalisation or re-organisation of the operations of Airservices.
43. Paragraphs 10 to 17 of this Ruling describe the nature of the rationalisation or re-organisation of Airservices' operations. In approving the Scheme, the Commissioner has had regard to the changes in the operations and nature of the work force of Airservices. It is considered that the Scheme is to be implemented by Airservices with a view to rationalising or re-organising the operations of Airservices for the purposes of paragraph 83-180(3)(b).
48. Under subsection 83-180(1), so much of the payment received by an employee because the employee retires under an early retirement scheme as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of their employment at the time of termination is an early retirement scheme payment.
49. It should be noted that, in order for a payment to qualify as an early retirement scheme payment, it must also satisfy the following requirements (as set out in subsections 83-180(2), 83-180(5) and 83-180(6)):
- the retirement occurred before the employee reached pension age or such earlier date on which the employee's employment would have terminated under the terms of employment because of the employee attaining a certain age or completing a particular period of service (as the case may be)
- if the employee and the employer are not dealing with each other at arm's length (for example because they are related in some way), the payment does not exceed the amount that could reasonably be expected to be made if the retirement was at arm's length
- at the time of retirement there was no arrangement between the employee and the employer, or between the employer and another person, to employ the employee after the retirement
- the payment must not be made in lieu of superannuation benefits, and
- it is not a payment mentioned in section 82-135 (apart from paragraph 82-135(e)).
... any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable (or intended to be enforceable) by legal proceedings.
52. In accordance with section 83-170, an early retirement scheme payment that falls within the specified limit is referred to as the 'tax-free' amount and will not be assessable income and will not be exempt income.
53. For the 2021-22 income year, the tax-free amount is limited to $11,341 (base amount) plus $5,672 (service amount) for each whole year of completed employment service to which the early retirement scheme payment relates. It should be noted that six months, eight months or even 11 months do not count as a whole year for the purposes of this calculation.
55. The total payment calculated in accordance with paragraphs 25, 26 and 27, for each respective cohort of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraph 53 of this Ruling to determine the tax-free amount of the early retirement scheme payment.
- not be an employment termination payment (ETP), and
- not be able to be rolled-over into a superannuation fund.
57. Any payment in excess of this limit will be an ETP and will be split into tax-free and taxable components. The tax-free component of an ETP includes the pre-July 83 segment of the payment. The tax-free component is not assessable income and is not exempt income.
58. The taxable component of the ETP will be taxed at various rates depending on the person's age. It should be noted that the 'whole of income cap' does not apply to any part of the early retirement scheme payment but will apply to the payment in lieu of notice.
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Not previously issued as a draft
ITAA 1997 82-135
ITAA 1997 82-135(e)
ITAA 1997 83-170
ITAA 1997 83-180
ITAA 1997 83-180(1)
ITAA 1997 83-180(2)
ITAA 1997 83-180(3)
ITAA 1997 83-180(3)(a)
ITAA 1997 83-180(3)(b)
ITAA 1997 83-180(5)
ITAA 1997 83-180(6)
ITAA 1997 995-1(1)
Social Security Act 1991 23(1)