Class Ruling CR 2018/46
Date of effect: 14 November 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 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 Macquarie University (the University) shown at paragraph 15 (subject to paragraph 16) 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 Macquarie University (the University) shown at paragraph 15 (subject to paragraph 16) 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. The Ruling applies from 14 November 2018 to 1 November 2019. The Ruling continues to apply after 1 November 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. 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 Macquarie University Academic Staff Early Retirement Scheme 2018-2019 , hereafter referred to as 'the Scheme'. 9. The University operates in a dynamic environment which requires ongoing review of strategic priorities and operating models. 10. In August 2013, the University launched its strategic plan, ' Our University: A Framing of Futures ' (the Strategy). The strategic priorities outlined in the Strategy include fostering a culture of transformative learning in a research enriched environment, engagement and collaboration with industry and aligning the nature and size of the University for the future. 11. In support of the Strategy, the University has introduced the ' Strategic Research Framework 2015-2024 ' and a Learning and Teaching Framework, which directly align with the University's research and teaching priorities. The University has also recently commenced a comprehensive review of its curriculum, with a new curriculum suite to be launched in 2020. A major goal of this project is to ensure that the University's program offering is aligned with the interests and needs of students, which have changed over time and will continue to evolve in the future. 12. More broadly, the Higher Education sector is experiencing major change. For example, in December 2017, the Government announced significant changes to the funding model for the sector. This change, in turn, has caused other changes in the sector (for example, university entry and student enrolment patterns) which have impacted the University. 13. These changes have also made it increasingly important for the University to respond and adapt to student needs, both present and future. This means aligning the size and composition of its work force so that it is appropriately equipped to serve its students, including the alignment of human resources with student load, as well as areas of research focus. 14. In this context, the intent of the Scheme is to enable a voluntary renewal and re-organisation of the University's academic work force. The Scheme will enable staff whose personal career aspirations and capabilities no longer align with the University's strategic priorities and performance expectations, and who meet the eligibility criteria, to leave the University voluntarily, with appropriate financial support. 15. The class of employees to whom the Scheme applies is all academic staff who meet the following criteria: 16. The following staff are considered to be key employees and are excluded from the Scheme based on data as at the 'date of announcement' of the Scheme: 17. The Scheme will be open to eligible staff members from the day after the date of the Commissioner's approval, and will be implemented as follows: 18. The University may offer the Scheme to each Faculty on a phased basis if necessary. 19. All eligible staff members will be able to express an interest in the Scheme at some point during the duration of the Scheme. 20. The maximum number of early retirement offers under the Scheme will be 100. 21. If the number of eligible staff members who wish to retire under the Scheme is greater than the number of packages available, a Faculty level Committee, consisting of at least three members, including the Faculty Executive Dean and Director of Human Resources, will make a decision about which EOI should be accepted based on each individual's contribution to the University's strategic framework. Individuals who are considered to have made a lower contribution would be prioritised. 22. All eligible staff members under the Scheme will receive a payment as follows: 23. The payment made under the Scheme is in excess of any superannuation and any other benefits to which eligible staff members would otherwise be entitled in consequence of the voluntary termination of their employment at the time of the retirement. 24. Payments made under the Scheme will be at arm's length. 25. The retirement of eligible staff members who receive a payment under the Scheme will occur before they turn 65 years of age. 26. There is no agreement in place between an eligible staff member and the University, or between the University and another person to employ the eligible staff member after retirement under the Scheme. 27. Participation in the Scheme will be entirely voluntary. 28. The early retirement scheme to be implemented by the University is an early retirement scheme for the purposes of section 83-180. 29. Accordingly, so much of the payment received by an eligible staff member that exceeds the amount that could reasonably be expected to be received by the staff member in consequence of voluntary termination of their employment at the time of the retirement will be an early retirement scheme payment. 30. 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 14 November 2018 31. A scheme will be an early retirement scheme if it satisfies the requirements of subsections 83-180(3). 32. 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: 33. 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). 34. The class of employees to whom early retirement will be offered under the Scheme is set out in paragraph 15 (subject to paragraph 16) of this Ruling. 35. 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: 36. 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). 37. Paragraphs 9 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 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: 38. The Scheme is proposed to operate for a period from 14 November 2018 to 1 November 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. 39. 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: 40. 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. 41. 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)): 42. 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 '. 43. 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. 44. 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. 45. For the 2019-20 income year, the base amounts and the service amounts are yet to be determined at the publication of this Ruling. Therefore, staff members should check the Australian Taxation Office website for these indexed amounts at the relevant time. 46. The total of the amount received on the termination of employment calculated in accordance with paragraph 22 of this Ruling may qualify as an early retirement scheme payment. 47. The total payment calculated in accordance with paragraph 22 of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraphs 44 and 45 of this Ruling to determine the tax-free amount of the early retirement scheme payment. 48. The tax-free amount will: 49. 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. 50. 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. 51. 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: 28. The early retirement scheme to be implemented by the University is an early retirement scheme for the purposes of section 83-180. 29. Accordingly, so much of the payment received by an eligible staff member that exceeds the amount that could reasonably be expected to be received by the staff member in consequence of voluntary termination of their employment at the time of the retirement will be an early retirement scheme payment. 30. 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 14 November 2018


Appendix: 31. A scheme will be an early retirement scheme if it satisfies the requirements of subsections 83-180(3). 32. 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: 33. 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). 34. The class of employees to whom early retirement will be offered under the Scheme is set out in paragraph 15 (subject to paragraph 16) of this Ruling. 35. 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: 36. 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). 37. Paragraphs 9 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 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: 38. The Scheme is proposed to operate for a period from 14 November 2018 to 1 November 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. 39. 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: 40. 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. 41. 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)): 42. 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 '. 43. 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. 44. 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. 45. For the 2019-20 income year, the base amounts and the service amounts are yet to be determined at the publication of this Ruling. Therefore, staff members should check the Australian Taxation Office website for these indexed amounts at the relevant time. 46. The total of the amount received on the termination of employment calculated in accordance with paragraph 22 of this Ruling may qualify as an early retirement scheme payment. 47. The total payment calculated in accordance with paragraph 22 of this Ruling will be measured against the limit in accordance with the formula mentioned in paragraphs 44 and 45 of this Ruling to determine the tax-free amount of the early retirement scheme payment. 48. The tax-free amount will: 49. 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. 50. 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. | 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