Class Ruling CR 2007/73
Date of effect: 8 August 2007

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. 2. This Ruling approves the particular early retirement scheme and acknowledges the availability of tax concessions for entities receiving payment under the scheme. There are many conditions attached to this Ruling and readers should be careful to ensure that these conditions are met before relying on this Ruling. Relevant provision(s) 3. The relevant provisions dealt with in this Ruling are: All subsequent references are to the ITAA 1997 unless stated otherwise. Class of entities 4. The class of entities to which this Ruling applies is those employees of Golden Casket Lottery Corporation Limited (Golden Casket) who receive a payment under the scheme described in paragraphs 15 to 32 of this Ruling. Qualifications 5. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 6. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 15 to 32 of this Ruling. 7. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 8. This work is copyright. Apart from any use as permitted under the Copyright Act 1968 , no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to: 9. A copy of this Ruling must be given to all employees eligible to participate in the early retirement scheme.

Class of entities or scheme: 4. The class of entities to which this Ruling applies is those employees of Golden Casket Lottery Corporation Limited (Golden Casket) who receive a payment under the scheme described in paragraphs 15 to 32 of this Ruling. | Qualifications: 5. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 6. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 15 to 32 of this Ruling. 7. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 8. This work is copyright. Apart from any use as permitted under the Copyright Act 1968 , no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to: 9. A copy of this Ruling must be given to all employees eligible to participate in the early retirement scheme. 10. This Ruling applies from 8 August 2007 to 7 August 2008. However, the Ruling continues to apply after 7 August 2008 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. 11. The Ruling does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Ruling. Furthermore, the Ruling only applies to the extent that: 12. If this Ruling is inconsistent with a later public or private ruling, the relevant class of entities may rely on either ruling which applies to them (item 1 of subsection 357-75(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA)). 13. If this Ruling is inconsistent with an earlier private ruling, the private ruling is taken not to have been made if, when the Ruling is made, the following two conditions are met: 14. If the above two conditions do not apply, the relevant class of entities may rely on either ruling which applies to them (item 3 of subsection 357-75(1) of Schedule 1 to the TAA). 15. The following description of the scheme is based on information provided by the applicant. 16. Golden Casket is seeking approval for an early retirement scheme. 17. Golden Casket is a lottery operator that was wholly owned by the Queensland State Government. 18. On 16 April 2007, the Queensland Government announced the sale of Golden Casket to Tattersall's Limited, a lottery and gaming operator with business products including lotteries, wagering, Keno and poker machines. 19. Many functions are duplicated between the two businesses, providing opportunities for achieving synergies by integrating activities. 20. The future of the business as a part of a publicly listed company will also demand a more commercial orientation. The mix of skills required in the new private sector environment will be different to those that have been needed as a government owned corporation. Many existing employees from a public service background may not wish to develop the mindsets and skills required for the new business. 21. The Voluntary Early Retirement Scheme will be offered by Golden Casket to all its permanent employees. 22. Golden Casket will maintain a limited right of veto on the total number of employees who can accept the offer and retire under the scheme. This includes limiting the number of employees in particular divisions or teams who can retire under the scheme. Where it is necessary to exercise the veto, employees with the longest period of service will be able to retire. 23. Golden Casket will undertake a scheduled release of employees who retire under the scheme. The conditions surrounding this scheduled release are: 24. Employees who retire under the scheme will terminate employment and receive the payment before 8 August 2008. 25. The payment that employees will receive under the scheme is calculated as follows: | Payments made under the Scheme: 26. For a payment made under the above mentioned scheme to qualify as an early retirement scheme payment, the conditions set out in paragraphs 27 to 32 of this Ruling must be met. Please note, any payment made under the scheme that does not satisfy these requirements is not covered by this Ruling. 27. The payment must be received by an employee because of their retirement under an early retirement scheme. The early retirement scheme payment will be so much of the payment that exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the retirement. 28. The payment must not be a payment mentioned in subsection 82-135 (apart from paragraph 82-135(e)). 29. The payment must not be made in lieu of superannuation benefits. 30. Where 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 what would have been paid to the employee had they been dealing with each other at arm's length. 31. The employee must retire before the earlier of: 32. At the time of the retirement, there is no arrangement in force between the employee and the employer, or between the employer and another person, to employ the employee after the retirement. 33. The early retirement scheme to be implemented by Golden Casket is an early retirement scheme for the purposes of section 83-180. 34. Accordingly, so much of the payment received by an employee that exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the retirement will be an early retirement scheme payment. 35. In addition, so much of the early retirement scheme payment as falls within the threshold calculated in accordance with section 83-170 is not assessable income and is not exempt income. Commissioner of Taxation 8 August 2007 36. Where a scheme satisfies the requirements of subsection 83-180(3), that scheme will be an 'early retirement scheme'. 37. The Commissioner has issued Taxation Ruling TR 94/12 Income tax: approved early retirement scheme and bona fide redundancy payments, which sets out guidelines on the application of the former section 27E of the Income Tax Assessment Act 1936 , which section 83-180 of the ITAA 1997 replaced. 38. Subsection 83-180(3) states that: These three conditions are discussed below. | All employees within a class approved by the Commissioner may participate in the scheme: 39. In order to satisfy the first condition, the scheme must be offered to all employees in a class approved by the Commissioner under paragraph 83-180(3)(a). 40. The class of employees to whom early retirement will be offered is set out in paragraph 21 of this Ruling. 41. The Commissioner considers that 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 the employer. These employees meet the requirements of an approved class of employees for the purposes of paragraph 83-180(3)(a). | 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. Under paragraph 83-180(3)(b) the employer's purpose in implementing the scheme must be to rationalise or re-organise the employer's operations by making any changes to the employer's operations, or the nature of the work force, that the Commissioner approves. 43. Paragraph 17 to 20 of this Ruling describes the nature of the rationalisation or re-organisation of Golden Casket's operations. In approving the scheme, the Commissioner has had regard to the changes in the operations and nature of the workforce of the employer. It is therefore 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). | The scheme must be approved by the Commissioner prior to its implementation: 44. The scheme is proposed to operate for a period of 12 months from the date of approval by the Commissioner. Approval will be granted prior to implementation therefore the third condition is satisfied. | Other relevant information: 45. 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 his or her employment at the time of termination is an early retirement scheme payment. 46. 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 83-130(6)): 47. The term 'arrangement' is defined in subsection 995-1(1) as meaning 'any agreement, arrangement or understanding whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable by legal proceedings'. 48. An early retirement scheme payment made on or after 1 July 2007 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. 49. For the year ending 30 June 2008, this amount is limited to $7,020 plus $3,511 for each whole year of completed employment service to which the early retirement scheme payment relates. Please note that six months, eight months or even eleven months do not count as a whole year for the purposes of this calculation. The $7,020 and $3,511 limits will be indexed to rise in each subsequent year in line with increases in average weekly ordinary time earnings. 50. The total of the amount received on the termination of employment calculated in accordance with paragraph 25 of this Ruling may qualify as an early retirement scheme payment. 51. The total of the payments in the previous paragraph will be measured against the limit calculated in accordance with paragraph 49 of this Ruling to determine the 'tax-free' amount of the early retirement scheme payment. 52. The 'tax-free' amount will: 53. Any payment in excess of this limit will be an employment termination payment and split up into tax-free and taxable components. The tax-free component of an employment termination payment includes the pre-July 83 segment of the payment. The tax-free component is not assessable income and is not exempt income. 54. Employment termination payments cannot be rolled-over into a superannuation fund. 55. The following is a detailed contents list for this ruling: Not previously issued as a draft

Ruling: 33. The early retirement scheme to be implemented by Golden Casket is an early retirement scheme for the purposes of section 83-180. 34. Accordingly, so much of the payment received by an employee that exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the retirement will be an early retirement scheme payment. 35. In addition, so much of the early retirement scheme payment as falls within the threshold calculated in accordance with section 83-170 is not assessable income and is not exempt income. Commissioner of Taxation 8 August 2007


Appendix: 36. Where a scheme satisfies the requirements of subsection 83-180(3), that scheme will be an 'early retirement scheme'. 37. The Commissioner has issued Taxation Ruling TR 94/12 Income tax: approved early retirement scheme and bona fide redundancy payments, which sets out guidelines on the application of the former section 27E of the Income Tax Assessment Act 1936 , which section 83-180 of the ITAA 1997 replaced. 38. Subsection 83-180(3) states that: These three conditions are discussed below. | All employees within a class approved by the Commissioner may participate in the scheme: 39. In order to satisfy the first condition, the scheme must be offered to all employees in a class approved by the Commissioner under paragraph 83-180(3)(a). 40. The class of employees to whom early retirement will be offered is set out in paragraph 21 of this Ruling. 41. The Commissioner considers that 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 the employer. These employees meet the requirements of an approved class of employees for the purposes of paragraph 83-180(3)(a). | 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. Under paragraph 83-180(3)(b) the employer's purpose in implementing the scheme must be to rationalise or re-organise the employer's operations by making any changes to the employer's operations, or the nature of the work force, that the Commissioner approves. 43. Paragraph 17 to 20 of this Ruling describes the nature of the rationalisation or re-organisation of Golden Casket's operations. In approving the scheme, the Commissioner has had regard to the changes in the operations and nature of the workforce of the employer. It is therefore 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). | The scheme must be approved by the Commissioner prior to its implementation: 44. The scheme is proposed to operate for a period of 12 months from the date of approval by the Commissioner. Approval will be granted prior to implementation therefore the third condition is satisfied. | Other relevant information: 45. 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 his or her employment at the time of termination is an early retirement scheme payment. 46. 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 83-130(6)): 47. The term 'arrangement' is defined in subsection 995-1(1) as meaning 'any agreement, arrangement or understanding whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable by legal proceedings'. 48. An early retirement scheme payment made on or after 1 July 2007 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. 49. For the year ending 30 June 2008, this amount is limited to $7,020 plus $3,511 for each whole year of completed employment service to which the early retirement scheme payment relates. Please note that six months, eight months or even eleven months do not count as a whole year for the purposes of this calculation. The $7,020 and $3,511 limits will be indexed to rise in each subsequent year in line with increases in average weekly ordinary time earnings. 50. The total of the amount received on the termination of employment calculated in accordance with paragraph 25 of this Ruling may qualify as an early retirement scheme payment. 51. The total of the payments in the previous paragraph will be measured against the limit calculated in accordance with paragraph 49 of this Ruling to determine the 'tax-free' amount of the early retirement scheme payment. 52. The 'tax-free' amount will: 53. Any payment in excess of this limit will be an employment termination payment and split up into tax-free and taxable components. The tax-free component of an employment termination payment includes the pre-July 83 segment of the payment. The tax-free component is not assessable income and is not exempt income. 54. Employment termination payments cannot be rolled-over into a superannuation fund.


What this Ruling is about | NOT LEGALLY BINDING SECTION: | A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. | If you rely on this ruling, we must apply the law to you in the way set out in the ruling (or in a way that is more favourable for you if we are satisfied that the ruling is incorrect and disadvantages you, and we are not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. | Period of continuous service | More than 1 year but not more than 2 years | More than 2 years but not more than 3 years | More than 3 years but not more than 4 years | 2 weeks pay for each year of service and a proportionate amount for an incomplete year of service up to a maximum of 52 weeks | Appendix 2 - Detailed contents list


Related rulings: TR 94/12
Legislative references: ITAA 1997 82-10 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(3)(c) ITAA 1997 83-180(5) ITAA 1997 83-180(6) ITAA 1997 995-1(1) TAA 1953 TAA 1953 Sch 1 357-75(1) Copyright Act 1968
Subject references: early retirement employment termination payment scheme payment