Class Ruling CR 2013/100
Date of effect: 1 January 2014

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. Relevant provisions 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 all employees of the University of Tasmania (UTAS), shown at paragraph 15, who receive a payment under the scheme described in paragraphs 9 to 32 of this Ruling. Qualifications 4. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 5. 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 9 to 32 of this Ruling. 6. 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 all employees of the University of Tasmania (UTAS), shown at paragraph 15, who receive a payment under the scheme described in paragraphs 9 to 32 of this Ruling. | Qualifications: 4. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 5. 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 9 to 32 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This Ruling applies from 1 January 2014 to 31 December 2014. The Ruling continues to apply after 31 December 2014 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. However, this 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 this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). 8. A previous ruling issued to the UTAS under class ruling CR 2012/118. 9. The following description of the scheme is based on information provided by the applicant. 10. The UTAS is seeking the Commissioner's approval to implement an early retirement scheme (the Scheme) in accordance with section 83-180. 11. The Scheme will be titled the 'University of Tasmania 2014 early retirement scheme' and referred to as the Scheme. 12. In early 2012, UTAS launched its 2012 to 2022 strategic plan, 'Open to Talent' . To enable the achievement of the strategic plan, UTAS identified a need to re-profile its academic staff to better reflect its research and teaching performance aspirations as well as to review the delivery of professional services across the University. As a consequence, UTAS completed a review of both its professional services model and academic staff profile. The Scheme applies only to the academic staff. 13. A key aspect of the UTAS strategic plan is to further improve its teaching and research performance. This process will involve individual discussions with academic staff to align their personal career aspirations with those of the University. 14. The purpose of implementing the Scheme is to rationalise and re-organise the employer's operations and refresh the current academic workforce. UTAS seeks to offer eligible staff the opportunity to voluntarily leave the University with financial support should these aspirations not be aligned. 15. The class of employees to whom this Scheme applies is UTAS academic staff who meet all the following criteria: 16. The Scheme will not apply to academic staff at any level of classification if: 17. UTAS will be seeking expressions of interest from employees who wish to voluntarily leave the organisation under the Scheme. Following approval of the Scheme, eligible employees will be asked to nominate their expression of interest. 18. In the event the ERS is over subscribed, the ERS will be offered to the employee who first submitted their expression of interest will be made the offer to receive the payment under the Scheme. 19. All employees who accept the offer to retire under the Scheme will terminate employment and receive the payment at a date mutually determined by UTAS and the individual employee based on their operational requirements but no later than 31 December 2014. 20. The separation payment under the Scheme will comprise: and be capped to a maximum of 70 weeks in total. 21. In addition, all employees terminated under the Scheme will receive their statutory entitlements however they do not form part of the payment made under the Scheme. 22. The maximum number of packages available for retiring employees under the Scheme is limited. 23. The Scheme will operate from 1 January 2014 to 31 December 2014. 24. UTAS and the relevant employees will be dealing with each other at arm's length under the Scheme. 25. There is no arrangement in place between UTAS and the terminating employees, or between UTAS and any other person, for those employees to be re-employed after retirement under the Scheme. 26. The payment made under the Scheme is in excess of any superannuation and any other benefits to which eligible employees would otherwise be entitled. 27. The Scheme payments will not be made in lieu of superannuation benefits. 28. Participation in the Scheme is entirely voluntary. If an employee chooses not to participate, his or her employment shall continue with no change. 29. The retirement of employees who receive a payment under the Scheme will occur before they turn 65 years of age. 30. For payments made to eligible employees who have reached age 65 or over the payment will not be eligible for the tax free base limits under the Scheme. These payments will be concessionally taxed as employment termination payments up to the employment termination payment cap (ETP cap). 31. The ETP cap for the 2013-14 income year is $180,000. 32. All eligible employees are employed under the University of Tasmania Academic Staff Agreement 2010-12. 33. The early retirement scheme to be implemented by UTAS 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 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 18 December 2013 36. Where a scheme satisfies the requirements of section 83-180 that scheme will be an 'early retirement scheme'. 37. 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: 38. 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). 39. The class of employees to whom early retirement will be offered is set out in paragraph 15 and subject to the exclusions set out in paragraph 16 of this Ruling. 40. The Commissioner considers that this is an appropriate class of persons to whom the scheme will be offered. 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: 41. 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). 42. Paragraphs 12 to 14 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 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). Accordingly, the second condition for approval has been met. | The scheme must be approved by the Commissioner prior to its implementation: 43. The Scheme is proposed to operate from 1 January 2014 to 31 December 2014. 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. 44. The Scheme will be in operation for approximately 12 months. This is considered appropriate due to the circumstances of the reorganisation and the employees that will be given the option of early retirement under the Scheme. | 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 the retirement 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 83-180(6)): 47. 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'. 48. 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. 49. For the 2013-14 income year, the proposed tax free amount is limited to $9,246 (base amount) plus $4,624 (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. 50. The total of the amount received on termination of employment calculated in accordance with paragraph 20 of this ruling may qualify as an early retirement scheme payment. 51. The total payment being made to eligible employee under the age of 65 years and calculated in accordance with paragraph 50 of this ruling will be measured against the limit calculated in accordance with the formula mentioned in 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 where the payment is received no later than 12 months after termination of employment and will be split into tax free and taxable components. The tax-free component of an employment termination payment (ETP) includes the pre-July 83 segment of the payment. The tax free component is not assessable income and is not exempt income. 54. Payments made under the ERS in excess of the tax-free limit will be concessionally taxed up to the ETP cap of $180,000 for the 2013-14 income year and will continue to have access to the full benefit of an ETP tax offset under subsection 82-10(3). 55. The ETP cap is reduced by ETPs received earlier in the year or by ETPs received in an earlier year relating to the same termination. 56. 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: 33. The early retirement scheme to be implemented by UTAS 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 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 18 December 2013


Appendix: 36. Where a scheme satisfies the requirements of section 83-180 that scheme will be an 'early retirement scheme'. 37. 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: 38. 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). 39. The class of employees to whom early retirement will be offered is set out in paragraph 15 and subject to the exclusions set out in paragraph 16 of this Ruling. 40. The Commissioner considers that this is an appropriate class of persons to whom the scheme will be offered. 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: 41. 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). 42. Paragraphs 12 to 14 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 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). Accordingly, the second condition for approval has been met. | The scheme must be approved by the Commissioner prior to its implementation: 43. The Scheme is proposed to operate from 1 January 2014 to 31 December 2014. 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. 44. The Scheme will be in operation for approximately 12 months. This is considered appropriate due to the circumstances of the reorganisation and the employees that will be given the option of early retirement under the Scheme. | 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 the retirement 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 83-180(6)): 47. 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'. 48. 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. 49. For the 2013-14 income year, the proposed tax free amount is limited to $9,246 (base amount) plus $4,624 (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. 50. The total of the amount received on termination of employment calculated in accordance with paragraph 20 of this ruling may qualify as an early retirement scheme payment. 51. The total payment being made to eligible employee under the age of 65 years and calculated in accordance with paragraph 50 of this ruling will be measured against the limit calculated in accordance with the formula mentioned in 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 where the payment is received no later than 12 months after termination of employment and will be split into tax free and taxable components. The tax-free component of an employment termination payment (ETP) includes the pre-July 83 segment of the payment. The tax free component is not assessable income and is not exempt income. 54. Payments made under the ERS in excess of the tax-free limit will be concessionally taxed up to the ETP cap of $180,000 for the 2013-14 income year and will continue to have access to the full benefit of an ETP tax offset under subsection 82-10(3). 55. The ETP cap is reduced by ETPs received earlier in the year or by ETPs received in an earlier year relating to the same termination.


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. | Academic classification Level | Higher Degree by Research (HDR) candidates | # as defined in Opening UTAS to Talent: The UTAS Academic | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10 CR 2012/118
Legislative references: ITAA 1997 ITAA 1997 82-10(3) 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 Copyright Act 1968
Subject references: early retirement employment termination eligible termination payment redundancy or early retirement scheme payment