Museums Victoria - 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.
11. A plateauing of funding from both public and private sources since 2012, the impacts of operational shutdowns due to COVID-19 restrictions and significant increases in operating costs (most notably salaries and wages) has resulted in a projected deficit and a reduction in the viability of the sustainability of Museums Victoria's current business model. In order to continue delivery of this transformative program, the Museums Victoria Executive, with full support of the Museums Victoria Board, is focused on addressing the structural budgetary issues.
12. As such, Museums Victoria has determined that in order to address the projected deficit and to increase the viability and sustainability of the organisation, Museums Victoria will offer voluntary departure packages in order to reduce recurrent expenditure on salaries and wages.
13. The Victorian Government released an Industrial Relations Framework for managing the COVID-19 pandemic which meant Museums Victoria could not implement the early retirement scheme approved in Class Ruling CR 2020/13 Museums Victoria - early retirement scheme 2020. The Industrial Relations Framework has ceased operation and Museums Victoria is now proceeding with an early retirement scheme.
- are employed on an ongoing basis
- have two years or more of service
- are employed in any division of Museums Victoria, and
- are Victorian Public Service Classification Grades 2 - 7.
- employees who are in positions funded by an external grant
- employees with an active workers' compensation claim, and
- employees on unpaid leave.
17. If significant numbers of applications are made within a department or division, participation will be limited to maintain minimum operating staffing requirements in the department or division. Preference will be given to employees with the greatest number of years of service.
18. There is also a limit on the total number of packages available under the Scheme. If more employees apply to participate in the Scheme than the number of packages available, offers will be made to employees with the greatest number of years of service.
19. Employees whose applications are accepted will receive formal offers shortly after the application period closes. Employees will have a limited time to accept or decline the offer. Once an offer is accepted, voluntary withdrawal from the Scheme will not be permitted.
- lump sum payment of four weeks' salary irrespective of length of service
- two weeks of salary per each completed year of continuous service (capped at 15 years), and
- a lump sum voluntary departure incentive based on continuous years of service as follows
|Years of service||Voluntary departure incentive|
|Two to seven years||$5,000|
|Eight to nine years||$7,000|
|Over nine years||$10,000|
22. All payments will be calculated with reference to the employee's superannuable salary and any superannuable allowances applicable to their continuing role as at the date of termination of employment.
25. Employees retiring under the Scheme will receive their statutory entitlements, such as annual leave and long service leave, where applicable. However, these amounts will not form part of the payment under the Scheme.
Commissioner of Taxation
14 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||31|
|All employees within a class approved by the Commissioner may participate in the scheme||33|
|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||37|
|The scheme must be approved by the Commissioner prior to its implementation||40|
|Other relevant information||43|
A scheme is an early retirement scheme if:
- all the employer's employees who comprise such a class of employees as the Commissioner approves may participate in the scheme; and
- 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
- 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 33 to 41 of this Ruling.
35. The Commissioner considers that, for the purposes of paragraph 83-180(3)(a), this is an appropriate class of persons for participation in 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 Museums Victoria.
38. Paragraphs 10 to 12 of this Ruling describe the nature of the rationalisation or re-organisation of the employer's operations. In approving the Scheme, the Commissioner has had regard to the changes in the operations and nature of the workforce of Museums Victoria. It is considered that the Scheme is to be implemented by the employer with a view to rationalising or re-organising the operations of the employer for the purposes of paragraph 83-180(3)(b).
43. 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.
44. 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), (5) and (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.
47. 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.
48. For the 2020-21 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.
50. The total payment calculated in accordance with paragraph 21 of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraph 46 of this Ruling to determine the tax-free amount of the early retirement scheme payment.
- an employment termination payment (ETP)
- able to be rolled-over into a superannuation fund.
52. 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.
53. 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.
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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)
Victoria State Government Public Sector Industrial Relations Policies 2015