Class Ruling CR 2017/66
Date of effect: 1 September 2017

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. Relevant provision(s) 2. The relevant provisions dealt with in this Ruling are: All legislative references are to the ITAA 1997 unless otherwise indicated. Class of entities 3. The class of entities to whom this scheme applies is those employees of the National Roads and Motorists' Association (NRMA) shown at paragraph 12 of this Ruling who receive a payment under the scheme described under the heading Scheme. Qualifications 4. 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 under the heading Scheme. 5. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then:

Class of entities or scheme: 3. The class of entities to whom this scheme applies is those employees of the National Roads and Motorists' Association (NRMA) shown at paragraph 12 of this Ruling who receive a payment under the scheme described under the heading Scheme. | Qualifications: 4. 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 under the heading Scheme. 5. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 6. This Ruling applies from 1 September 2017 to 31 December 2018. The Ruling continues to apply after 31 December 2018 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. However, the Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). 7. NRMA is seeking the Commissioner's approval to implement an early retirement scheme in accordance with section 83-180. 8. The scheme will be titled the ' National Roads and Motorists' Association Limited Early Retirement Scheme 2017' , hereafter referred to as 'the Scheme'. 9. The Scheme will be made available to certain eligible employees, namely all employees engaged as Patrols under the NRMA PATROL Enterprise Agreement 2014 in NSW and ACT who will have fifteen or more years' service as at 1 September 2017. 10. NRMA is undertaking a management plan that allows the re-organisation of the business with the aim of refreshing the workforce and the rebalancing of skill sets between technical and non-technical. These changes will not impact the number of roles required, but will necessitate the recruitment of new employees with the specific skillsets to enable NRMA to implement these initiatives. 11. Therefore, the purpose of the Scheme is to allow NRMA to rationalise and re-organise its operations for the purposes outlined in paragraph 10 above. 12. The class of employees to whom the Scheme applies are all those employees of NRMA who: 13. All eligible employees who retire under the Scheme will receive a voluntary departure package (VDP) as follows: 14. All eligible employees who retire under the Scheme will also receive their statutory entitlements. However, these payments will not form part of the payment made under the Scheme. 15. Participation in the Scheme is entirely voluntary. 16. The Scheme will be open to eligible employees from 1 September 2017 and will be implemented as follows: 17. NRMA will limit the maximum numbers of offers to be made to Eligible Employees under the Scheme. Should the number of Eligible Employees who make an expression of interest exceed the number of Packages available under the Scheme, the offer will be made firstly to those Eligible Employees aged 55 or over, then Eligible Employees aged 50 or over. 18. Additionally, NRMA must ensure that it has sufficient Patrol staff across NSW and ACT to maintain service levels. NRMA will take into account the geographic location of Eligible Employees seeking access to the Scheme when assessing expressions of interest, and will allow no more than 50% of Eligible Employees to retire in any particular service region under the Scheme. 19. The payment made under the Scheme is in excess of any superannuation and any other benefits to which eligible employees would otherwise be entitled. 20. Any employee who terminates their employment other than under the proposed Scheme will not be entitled to receive the Scheme payment. 21. Payments made under the Scheme will be at arm's length. 22. The retirement of employees who receive a payment under the scheme will occur before they turn 65 years of age. 23. There is no agreement in place between any eligible employee and NRMA, or between NRMA and another person to employ the eligible employee after retirement under the Scheme. 24. Participation in the Scheme is entirely voluntary. 25. The National Roads and Motorists' Limited Early Retirement Scheme 2017 is an early retirement scheme for the purposes of section 83-180. 26. 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. 27. 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 27 September 2017 28. A scheme will be an early retirement scheme if it satisfies the requirements of subsections 83-180(3) or (4). 29. Subsection 83-180(3) states that: These three conditions are now considered. | All employees within a class approved by the Commissioner may participate in the scheme: 30. 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). 31. The class of employees to whom early retirement will be offered under the Scheme is set out in paragraph 12 of this Ruling. 32. 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. It is therefore considered that 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: 33. The proposed scheme must be implemented by the employer with a view to rationalising or re-organising the operations of the employer as described in paragraph 83-180(3)(b). 34. Paragraphs 10 and 11 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 work force of the employer. 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). 35. Accordingly, the second condition for approval has been met. | The scheme must be approved by the Commissioner prior to its implementation: 36. The Scheme is proposed to operate for a period from 1 September 2017 to 31 December 2018. The approval to be provided by the class ruling will have been granted prior to implementation therefore, for the purposes of paragraph 83-180(3)(c), this condition is satisfied. 37. The Scheme will be in operation for approximately fifteen months. This is considered appropriate due to the circumstances of the re-organisation. 38. As all the conditions for approval under subsection 83-180(3) have been met, consideration of subsection 83-180(4) is not required. | Other relevant information: 39. Under subsection 83-180(1), an early retirement scheme payment is the amount: 40. 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)): 41. 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'. 42. 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. 43. For the 2017-18 income year, the tax-free amount is limited to $10,155 (base amount) plus $5,078 (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 eleven months do not count as a whole year for the purposes of this calculation. 44. The total of the amount received on the termination of employment calculated in accordance with paragraphs 13 and 14 of this Ruling may qualify as an early retirement scheme payment. 45. The total payment calculated in accordance with paragraphs 13 and 14 of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraphs 43 and 44 of this Ruling to determine the tax-free amount of the early retirement scheme payment. 46. The tax-free amount will: 47. 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. 48. 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. 49. The following is a detailed contents list for this Ruling: © 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). Not previously issued as a draft

Ruling: 25. The National Roads and Motorists' Limited Early Retirement Scheme 2017 is an early retirement scheme for the purposes of section 83-180. 26. 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. 27. 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 27 September 2017


Appendix: 28. A scheme will be an early retirement scheme if it satisfies the requirements of subsections 83-180(3) or (4). 29. Subsection 83-180(3) states that: These three conditions are now considered. | All employees within a class approved by the Commissioner may participate in the scheme: 30. 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). 31. The class of employees to whom early retirement will be offered under the Scheme is set out in paragraph 12 of this Ruling. 32. 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. It is therefore considered that 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: 33. The proposed scheme must be implemented by the employer with a view to rationalising or re-organising the operations of the employer as described in paragraph 83-180(3)(b). 34. Paragraphs 10 and 11 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 work force of the employer. 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). 35. Accordingly, the second condition for approval has been met. | The scheme must be approved by the Commissioner prior to its implementation: 36. The Scheme is proposed to operate for a period from 1 September 2017 to 31 December 2018. The approval to be provided by the class ruling will have been granted prior to implementation therefore, for the purposes of paragraph 83-180(3)(c), this condition is satisfied. 37. The Scheme will be in operation for approximately fifteen months. This is considered appropriate due to the circumstances of the re-organisation. 38. As all the conditions for approval under subsection 83-180(3) have been met, consideration of subsection 83-180(4) is not required. | Other relevant information: 39. Under subsection 83-180(1), an early retirement scheme payment is the amount: 40. 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)): 41. 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'. 42. 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. 43. For the 2017-18 income year, the tax-free amount is limited to $10,155 (base amount) plus $5,078 (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 eleven months do not count as a whole year for the purposes of this calculation. 44. The total of the amount received on the termination of employment calculated in accordance with paragraphs 13 and 14 of this Ruling may qualify as an early retirement scheme payment. 45. The total payment calculated in accordance with paragraphs 13 and 14 of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraphs 43 and 44 of this Ruling to determine the tax-free amount of the early retirement scheme payment. 46. The tax-free amount will: 47. 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. 48. 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.


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, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is 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. | Summary - what this Ruling is about | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10
Legislative references: ITAA 1997 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(4) ITAA 1997 83-180(5) ITAA 1997 83-180(6) ITAA 1997 995-1(1) TAA 1953