Environment Protection Authority Victoria - early retirement scheme 2021-2022
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 Victorian Government 2021/22 Budget included investments to stimulate the economy, promote economic recovery, create jobs and invest in the implementation of the Victorian Government's reform agenda.
11. In the context of this changed economic landscape and increased expenditure to fund the health and economic response to the global COVID-19 pandemic, the Victorian Government is taking steps to progressively realign expenditure to target areas of highest priority.
12. The EPA is facing, and will continue to face in the medium term, significant changes to its operations due to the impact of the COVID-19 pandemic, as well as changes to the Environment Protection Act 2017 (Vic) which came into effect on 1 July 2021, with the associated fundamental change to Victoria's focus for environment protection and human health to a prevention-based approach.
13. A key aspect of the EPA's plan is to rationalise and reorganise its operations to make a contribution to the initiatives being carried out by the Victorian Government. As such, the EPA has identified a need to reduce operational staffing costs.
14. The class of employees to whom this Scheme applies are ongoing employees of the EPA who are employed at 31 October 2021 in the functional areas of Corporate Services, Communications and Engagement (Public Affairs), Regional / Divisional Business Support and Business Improvement.
- executive officers
- employees with less than 12-months' service
- employees engaged on a casual basis
- employees engaged on a fixed-term basis
- employees on probation
- employees on leave without pay.
16. Following approval of the Scheme, the EPA will offer employees within the class the opportunity to retire early. Employees will have four weeks from the date of invitation to submit an expression of interest.
18. Where the number of employees seeking to participate in the Scheme exceeds the number of packages available (such that the Scheme is oversubscribed), applications will be processed on the basis of length of continuous service, with those employees with a longer period of service to be given priority.
19. If the number of employees initially willing to participate in the Scheme is less than the number expected by the EPA, the EPA may implement a second expression of interest process during the Scheme period.
- a lump sum incentive of $15,000 for a full-time employee and pro rata for a part-time employee
- four weeks' pay (irrespective of the employee's length of service)
- two weeks' pay per each completed year of continuous service, up to a maximum of 15 years, and
- an additional four weeks' pay for employees who are over 54 years of age.
22. For ongoing part-time employees, payments for subparagraphs 21(a) and (b) of this Ruling will be calculated on a pro rata basis. For employees who have a period of part-time employment in the most recent years of continuous service, payment for subparagraph 21(c) of this Ruling will be calculated on a pro rata basis.
26. Employees who retire under the Scheme and receive the early retirement payment will do so before they reach the pension age (as defined in the Income Tax Assessment Act 1997 by reference to the Social Security Act 1991).
Commissioner of Taxation
10 November 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||30|
|All applicants within a class approved by the Commissioner may participate in the scheme||32|
|The employer's purpose in implementing the scheme is to rationalise or reorganise the employer's operations in a way approved by the Commissioner||36|
|The scheme must be approved by the Commissioner prior to its implementation||39|
|Other relevant information||42|
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.
34. 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 reorganisation of the operations of the EPA.
37. Paragraphs 10 to 13 of this Ruling describe the nature of the rationalisation or reorganisation 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 the EPA. It is considered that the Scheme is to be implemented by the EPA with a view to rationalising or reorganising the operations of the EPA for the purposes of paragraph 83-180(3)(b).
42. 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.
43. 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.
46. 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.
47. 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.
48. For the 2022-23 income year, the base amount and the service amount are yet to be determined at the date of publication of this Ruling. Therefore, employees should check the ATO website for these indexed amounts at the relevant time.
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 47 of this Ruling to determine the tax-free amount of the early retirement scheme payment.
- an employment termination payment (ETP), and
- able to be rolled-over into a super 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)
Environment Protection Act 2017 (Vic)
Social Security Act 1991 23(1)
Department of Treasury and Finance (26 October 2021) Victorian Budget 2021/22