Class Ruling CR 2018/55
Date of effect: 12 December 2018

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 provisions 2. The relevant provisions dealt with in this Ruling are: All subsequent legislative references are to the ITAA 1997 unless specified otherwise. Class of entities 3. The class of entities to whom this scheme applies is those employees of Charles Darwin University shown at paragraph 12, and subject to those at paragraph 16, 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 Charles Darwin University shown at paragraph 12, and subject to those at paragraph 16, 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. The Ruling applies from 12 December 2018 to 31 December 2019. The Ruling continues to apply after 31 December 2019 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 Public Rulings ). 7. Charles Darwin University (the University) 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 ' Charles Darwin University Academic Staff Voluntary Early Retirement Scheme 2018 ', hereafter referred to as the 'Scheme'. 9. The University recognises that there are large scale changes occurring in higher education in Australia and globally. Significant increases in competition for students and research funding, the importance of research driven international rankings, and the impact of new technology have led the University to give consideration to the composition and nature of the staffing profile needed for the future. 10. The University intends to improve and re-align its academic staffing profile with its teaching and research goals in order to operate more effectively and efficiently. The University seeks to build a greater concentration of research staff and improve the quality, productivity, and profile of its researchers as well as strengthen the teaching quality and learning outcomes. 11. The purpose of the Scheme is to operate as a more effective and efficient organisation, as well as a refreshment of some of the workforce, by providing academic staff who may be considering retirement, or whose aspirations no longer align with those of the University, a financial incentive to retire early. 12. The class of employees to whom the Scheme applies is individual members of the Academic or Vocational Education and Training (VET) staff employed by the University in Australia who, as at the date that the Scheme comes into effect (the commencement date), meet the following criteria: 13. For the purposes of the Scheme, a member of the University's Academic or VET staff means a person so defined under the ' The Charles Darwin University and Union Enterprise Agreement 2013 '. 14. The term Academic/Higher Education for the purposes of the Enterprise Agreement, clause 3.17 defines the term as follows: 15. The term VET is defined in Clause 3.48 as 16. The following Academic or VET employees are specifically excluded from participating in the Scheme: 17. Eligible employees who retire under the Scheme will be paid a lump sum payment of two weeks' salary per each completed year of service (capped at 52 weeks). 18. A 'completed year of service' calculation will be based on continuous service in a continuing capacity only. Any unpaid time will not count as service but will not break service. 19. All payments will be calculated with reference to the staff member's superannuable salary and any superannuable allowances applicable to their continuing role as at the date of termination of employment. 20. In addition, all eligible employees terminated 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 made under the Scheme. 21. The number of packages is limited. The number of eligible employees approved will also not exceed 30% of the Academic or VET employees of any College or School. 22. Following the approval of the Scheme, all eligible employees will be formally invited to participate in the Scheme. Eligible employees will be given six weeks to submit their expression of interest in the Scheme. 23. Within four weeks after the conclusion of the expression of interest period, offers will be made by the University on the basis of the Scheme's criteria. 24. Eligible employees will have two weeks to accept the offer. Once an offer is accepted, voluntary withdrawal from the Scheme will not be permitted. 25. If the number of employees initially willing to participate in the Scheme is less than the number expected by the University, the University may implement a second expression of interest process during the duration of the Scheme. 26. Most employees who accept an offer to retire under the Scheme will terminate their employment and receive their payment within ten weeks of accepting an offer, but no later than 31 December 2019. The termination date will be subject to operational requirements but will be no later than the duration of the approved Scheme. 27. The payment made under the Scheme is in excess of any superannuation and any other benefits to which eligible employees would otherwise be entitled. 28. Employees who terminate their employment other than under the proposed Scheme, will not be entitled to receive the Scheme payment. 29. The retirement of employees who receive a payment under the Scheme will occur before they turn 65 years of age. 30. Employees who will be 65 or older at date of retirement will not be eligible for the Scheme but will have the same entitlements provided under a separate arrangement. These employees will not be eligible for any tax concessions applying to employees under the Scheme. 31. Payments made under the Scheme will be at arm's length. 32. There is no agreement in place between any eligible employee and the University, or between the University and another person to employ the eligible employee after retirement under the Scheme. 33. Participation in the Scheme is entirely voluntary. 34. The ' Charles Darwin University Academic Staff Voluntary Early Retirement Scheme 2018 ' is an early retirement scheme for the purposes of section 83-180. 35. 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. 36. 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 12 December 2018 37. A scheme will be an early retirement scheme if it satisfies the requirements of subsections 83-180(3). 38. 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: 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 under the Scheme is set out in paragraph 12, and subject to those in paragraph 16, 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. 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: 42. 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). 43. Paragraphs 9 to 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). | The scheme must be approved by the Commissioner prior to its implementation: 44. The Scheme is proposed to operate for a period from 12 December 2018 to 31 December 2019. 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. 45. The Scheme will be in operation for approximately twelve months. This is considered appropriate due to the circumstances of the re-organisation. | Other relevant information: 46. 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. 47. 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)): 48. 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 '. 49. 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. 50. For the 2018-19 income year, the tax-free amount is limited to $10,399 (base amount) plus $5,200 (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. 51. For the 2019-20 income year, the base amount and the service amount are yet to be determined at the publication of this Ruling. Therefore, employees should check the Australian Taxation Office website for these indexed amounts at the relevant time. 52. The total of the amount received on the termination of employment calculated in accordance with paragraph 17 of this Ruling may qualify as an early retirement scheme payment. 53. The total payment calculated in accordance with paragraph 17 of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraphs 50 and 51 of this Ruling to determine the tax-free amount of the early retirement scheme payment. 54. The tax-free amount will: 55. 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. 56. 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. 57. 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: 34. The ' Charles Darwin University Academic Staff Voluntary Early Retirement Scheme 2018 ' is an early retirement scheme for the purposes of section 83-180. 35. 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. 36. 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 12 December 2018


Appendix: 37. A scheme will be an early retirement scheme if it satisfies the requirements of subsections 83-180(3). 38. 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: 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 under the Scheme is set out in paragraph 12, and subject to those in paragraph 16, 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. 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: 42. 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). 43. Paragraphs 9 to 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). | The scheme must be approved by the Commissioner prior to its implementation: 44. The Scheme is proposed to operate for a period from 12 December 2018 to 31 December 2019. 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. 45. The Scheme will be in operation for approximately twelve months. This is considered appropriate due to the circumstances of the re-organisation. | Other relevant information: 46. 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. 47. 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)): 48. 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 '. 49. 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. 50. For the 2018-19 income year, the tax-free amount is limited to $10,399 (base amount) plus $5,200 (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. 51. For the 2019-20 income year, the base amount and the service amount are yet to be determined at the publication of this Ruling. Therefore, employees should check the Australian Taxation Office website for these indexed amounts at the relevant time. 52. The total of the amount received on the termination of employment calculated in accordance with paragraph 17 of this Ruling may qualify as an early retirement scheme payment. 53. The total payment calculated in accordance with paragraph 17 of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraphs 50 and 51 of this Ruling to determine the tax-free amount of the early retirement scheme payment. 54. The tax-free amount will: 55. 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. 56. 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.


Summary - 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. | 'Higher Education means teaching within a course that is self-accredited as a Higher Education course and/or the undertaking of research and research training' . | 'Vocational education and training (VET) means teaching, training and assessment within an Australian Skills Quality Authority (ASQA) approved course' . | 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(5) ITAA 1997 83-180(6) ITAA 1997 995-1(1) TAA 1953