Class Ruling

CR 2025/76

Museums Board of Victoria - Museums Victoria Early Retirement Scheme 2025-2026

• Please note that the PDF version is the authorised version of this ruling.

What this Ruling is about

1. This Ruling sets out the tax consequences of an early retirement scheme implemented by Museums Board of Victoria (Museums Victoria).

2. Details of this scheme are set out in paragraphs 9 to 41 of this Ruling.

3. All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated.

Who this Ruling applies to

4. This Ruling applies to you if you are a Museums Victoria employee who receives a payment under this scheme.

When this Ruling applies

5. This Ruling applies from 23 October 2025 until 30 June 2026.

Ruling

6. The Museums Victoria Early Retirement Scheme 2025-2026 (hereafter referred to as the Scheme) is an early retirement scheme for the purposes of subsection 83-180(3).

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 the voluntary termination of their employment at the time of the retirement will be an early retirement scheme payment.

8. In addition, so much of the Scheme payment as falls within the threshold calculated in accordance with section 83-170 is not assessable income and is not exempt income.

Scheme

9. The following description of the Scheme is based on information provided by the applicant. If the Scheme is not carried out as described, this Ruling cannot be relied upon.

10. Museums Board of Victoria, trading as Museums Victoria, is a public sector body for the purposes of the Public Administration Act 2004 (Vic), and is primarily funded by the Victorian Government, through Creative Victoria.

11. Creative Victoria has confirmed Museums Victoria's operational funding allocation for the 4-year period 2025–26 to 2028–29, being a significant reduction compared to previous years. The Victorian Government also confirmed it will no longer provide solvency support to Museums Victoria beyond 1 July 2025. Based on the operating model, over the 4-year period from 1 July 2025, Museums Victoria is required to save $56.1 million.

12. In the context of the changing economic landscape and State Government priorities, a plateauing of funding from relevant sources and significant increases in operating costs have resulted in the viability and sustainability of Museums Victoria's current business model being severely impacted.

13. Museums Victoria has determined that the required savings will require a reduction of 55 full-time equivalent (FTE) employees.

14. The employee reduction will ensure that Museums Victoria can sustainably operate within its allocated funding.

15. Museums Victoria is taking steps to progressively realign expenditure to target areas of the highest priority.

16. Museums Victoria has determined that voluntary departure packages be offered in support of both much-needed structural change and employee reductions.

17. The employee reduction will result in a reprioritising of Museums Victoria's core business operations and strategic priorities.

18. In addition to the reduction in FTE, Museums Victoria will be implementing a range of measures across the organisation, including:

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operating within reduced budgets in every department

•

deferring planned information and communications technology upgrades and scaling back capital projects

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proceeding with no allocation of funding for exhibition gallery renewal beyond minor upgrades

•

reducing other significant operating costs where possible

•

increasing admission ticket prices at Melbourne Museum

•

increasing revenue from a revised membership model

•

increasing revenue from new commercial streams.

19. To ensure that Museums Victoria can continue to deliver on its statutory obligations, the executive leadership team and board have established mechanisms to oversee the workforce reduction and potential impact on service delivery. These include:

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prioritisation of core activities – non-essential projects and initiatives have been paused or scaled back to allow teams to focus on high-impact, business-critical work

•

process streamlining – operational processes are being reviewed and simplified to reduce administrative burden and improve productivity

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technology strategy – designed to enable increased use of digital tools and automation in helping teams manage workloads more effectively and maintain service levels

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role redesign and redistribution – responsibilities will be realigned across divisions to ensure coverage of key functions

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support for staff wellbeing – additional resources are in place to support employee wellbeing, including flexible work arrangements, mental health support (via Employee Assistance Program), and occupational health and safety oversight.

20. Additional actions will be taken to ensure the organisation can operate with reduced FTE, including reporting to sub-committees, including the Audit and Risk Committee and the People, Culture and Industrial Relations Committee.

21. The organisational structure of Museums Victoria is outlined in the 2023–24 Annual Report, as follows:

•

Museums Victoria is divided into functional areas or divisions, each with specific responsibilities.

•

These divisions include areas such as Research, Collections, Engagement, Commercial Operations, and Corporate Services, and are each headed by a senior leader (Director or General Manager).

•

Within each division, there are departments that focus on more specific operational or strategic functions and are led by Department Heads or Managers.

22. Eligible employees are covered by the terms of the Cultural and Creative Agencies Enterprise Agreement 2025.

23. There are 510 employees in the class to which Museums Victoria proposes to offer early retirement, of which a minimum number of the equivalent of 55 FTE are required to accept the offer, to facilitate the required cost savings.

24. The class of employees that are eligible to participate in the Scheme are those employees who, as at the date that the Scheme comes into effect, are:

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engaged in ongoing employment with Museums Victoria for a period of 2 years' service or greater

•

employed in a division of Museums Victoria

•

employed in positions classified at Victorian Public Service (VPS) classification grades 2 to 7, and

•

aged under the pension age as defined by the Social Security Act 1991 as at the date of termination of employment under the Scheme.

25. The following employees are specifically excluded from participating in the Scheme:

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employees engaged on a fixed-term basis, including those on secondment from other public sector agencies

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casual employees

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executives classified at Public Entity Senior Executive Service levels 1, 2 or 3

•

employees who are employed by Museums Victoria in positions that are funded by an external grant

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employees subject to a probationary period

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employees who have less than 2 years' service with Museums Victoria

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employees who are employed in positions that are classified at VPS classification grade 1

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employees currently under investigation for allegations of misconduct or serious misconduct

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employees on unpaid leave

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employees who are WorkCover recipients.

Note: both employees on unpaid leave and WorkCover recipients may return to work in order to submit an application.

26. On commencement, eligible employees will be invited to submit their application to participate in the Scheme.

27. In order to mitigate the impact of the reduction of 55 FTE, where possible, reductions in staff will be applied uniformly across all divisions.

28. If significant numbers of applications are made within a particular division, participation will be limited, to maintain minimum operating staffing requirements. In such a situation, preference will be given to employees in the following order:

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employees with the greatest number of years of service

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employees that are closest to the aged pension age, and

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employees with the highest substantive VPS classification.

29. Museums Victoria will accept or reject applications on the following criteria:

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Firstly, where a department or division has an oversubscription, Museums Victoria will apply the preference order noted in paragraph 28 of this Ruling.

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Secondly, and notwithstanding the preference order in paragraph 28 of this Ruling, prioritisation when approving applications will be based on strategic alignment, operational necessity, and where practicable, equitable distribution of roles across departments or divisions. Board Committee oversight will ensure operational sustainability, monitor implementation progress, and provide good governance throughout the transition process.

30. Employees whose application is accepted will receive formal offers shortly after the application period closes. Employees will have approximately 2 weeks to accept or decline the offer. Once an offer is accepted, voluntary withdrawal from the Scheme will not be permitted.

31. Employees who accept an offer to retire under the Scheme will be provided with 4 weeks' notice of termination of their employment. At the employee's sole discretion, and with agreement from their manager and People and Culture section, an employee may bring forward their exit date.

32. The proposed timeline for the Scheme is:

•

Upon the Scheme being approved by the Commissioner, Museums Victoria will invite all eligible employees to participate in the Scheme via expressions of interest.

•

Museums Victoria will then complete a review of expressions of interest to ensure applicants meet the conditions of the Scheme – timeframe 2 weeks.

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Museums Victoria will then provide notice of the application outcome to all eligible employees who have self-nominated, including a summary of any offer made – timeframe 2 weeks.

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Museums Victoria expect to finalise employment terminations by 30 June 2026.

33. Employees who retire under the Scheme will be paid the following:

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component A – 4 weeks' pay (irrespective of the employee's length of service)

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component B – 2 weeks' pay per completed year of continuous service (up to a maximum of 15 years)

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component C – a lump sum voluntary departure incentive of up to $15,000 (paid pro rata based on the employee's FTE)

•

component D – an additional 4 weeks' pay for employees who are aged over 54 years of age (55 and older).

34. All payments are made at the time-fraction of the employee when accepting the offer.

35. Participation in the Scheme will be voluntary and self-nominated.

36. Employees who accept an offer to retire under the Scheme will be subject to a 3-calendar-year restriction on re-employment with, or fee for service from, a VPS employer, from the date of separation. This includes public sector employment through a labour hire agency.

37. The payment made under the Scheme is not in lieu of any superannuation benefit an employee may otherwise have been entitled to.

38. 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.

39. Museums Victoria and employees who participate in the Scheme will do so at arm's length.

40. The retirement of employees who receive a payment under the Scheme will occur before they reach pension age.

41. There will be no agreement between Museums Victoria and an employee who participates in the Scheme, or Museums Victoria and any other party, to employ any employee after retirement under the Scheme.

Commissioner of Taxation
22 October 2025

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Appendix – Explanation

Requirements for an early retirement scheme

42. A scheme will be an early retirement scheme if it satisfies the requirements of subsection 83-180(3).

43. Subsection 83-180(3) states that:

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.

All employees within a class approved by the Commissioner may participate in the Scheme

44. In order to satisfy the first requirement of subsection 83-180(3), the Scheme must be offered to all employees in a class approved by the Commissioner.

45. The class of employees to whom early retirement will be offered under the Scheme is set out in paragraph 24 of this Ruling.

46. 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.

47. Therefore, the first requirement of subsection 83-180(3) is satisfied.

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

48. The proposed Scheme must be implemented by the employer with a view to rationalising or re-organising the operations of the employer, as required by paragraph 83-180(3)(b).

49. Paragraphs 10 to 20 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 Museums Victoria with a view to rationalising or re-organising the operations of Museums Victoria for the purposes of paragraph 83-180(3)(b).

50. Accordingly, the second requirement of subsection 83-180(3) has been met.

The Scheme must be approved by the Commissioner prior to its implementation

51. The Scheme is proposed to operate for a period from 23 October 2025 to 30 June 2026.

52. The Scheme will be in operation for a period considered appropriate due to the circumstances of the re-organisation.

53. As the approval provided by this Ruling was granted prior to implementation, the third requirement of subsection 83-180(3) is satisfied.

Other relevant information

54. 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.

55. 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.

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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.

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The payment must not be made in lieu of superannuation benefits.

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It is not a payment mentioned in section 82-135 (apart from paragraph 82-135(e)).

56. The term 'pension age' has the meaning given by subsection 23(1) of the Social Security Act 1991.

57. The term 'arrangement' is defined in subsection 995-1(1) as meaning '... any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable (or intended to be enforceable) by legal proceedings'.

58. 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.

59. For the 2025–26 income year, the tax-free amount is limited to $13,100 (base amount) plus $6,552 (service amount) for each whole year of completed employment service to which the early retirement scheme payment relates. It should be noted that 6 months, 8 months or even 11 months do not count as a whole year for the purposes of this calculation.

60. The total of the amount received on the termination of employment calculated in accordance with paragraph 33 of this Ruling will qualify as an early retirement scheme payment.

61. The total payment calculated in accordance with paragraph 33 of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraph 59 of this Ruling to determine the tax-free amount of the early retirement scheme payment.

62. The tax-free amount will not be:

•

an employment termination payment (ETP), and

•

able to be rolled-over into a super fund.

63. 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.

64. 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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© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

References

ATO references:
NO 1-17Z8OM0V

Related Rulings/Determinations:

TR 2006/10

Business Line:  SEO

Legislative References:
ITAA 1997 82-135
ITAA 1997 82-135(e)
ITAA 1997 83-170
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)
Public Administration Act 2004 (Vic)
Social Security Act 1991 23(1)

Other References:
Cultural and Creative Agencies Enterprise Agreement 2025
Museums Victoria, Annual Report 2023-24 Museums Board of Victoria