Class Ruling CR 2008/83
Date of effect: 1 April 2008

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 provision(s) 2. The relevant provisions dealt with in this Ruling are: All references in this Ruling are to the FBTAA unless otherwise indicated. Class of entities 3. The class of entities to which this Ruling applies is all employers who make contributions to the Australian Construction Industry Redundancy Trust (ACIRT) for workers who are members (members) of ACIRT. 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 10 to 17 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 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:

Class of entities or scheme: 3. The class of entities to which this Ruling applies is all employers who make contributions to the Australian Construction Industry Redundancy Trust (ACIRT) for workers who are members (members) of ACIRT. | 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 10 to 17 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 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: 8. This Ruling applies from 1 April 2008 to 31 March 2012. The Ruling continues to apply after 31 March 2012 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). 9. Class Ruling CR 2006/121 dealt with this issue and applied to all entities within the specified class who entered into the specific scheme described therein during the timeframe of that ruling. That is, from 1 April 2004 to 31 March 2008. 10. The following description of the scheme is based on information provided by the applicant: 11. Employers provide redundancy entitlements for their workers pursuant to various awards and agreements (industrial instruments) of which the NBCIA and NSW BCIA are representative examples. In doing so, employers may fund the worker redundancy entitlements they are required to make by the payment of contributions to ACIRT. 12. ACIRT is an Australian resident trust fund governed by a trust deed, which established the fund in Australia. The central management and control of the fund is in Australia. 13. The trustee of ACIRT is ACIRT Pty Ltd ACN 062 330 170 (the ACIRT Trustee), an Australian resident company. 14. ACIRT is an approved worker entitlement fund for the purposes of section 58PB. 15. ACIRT accepts contributions from employers to fund each worker's individual redundancy benefit. ACIRT and the employers execute an agreement called a 'Deed of Adherence' which sets out the amount to be contributed by the employer in respect of each worker. This can be calculated by reference to either: 16. Clause 16 in both the NBCIA and NSW BCIA deal with redundancy matters and are identical in terms of how contributions are to be made. Clause 16.2.1 of the NBCIA states: Clause 16.2.7 of the NBCIA states: 17. The EBARC deals with both the payment of the employer to a fund and also the payments that are required to be made to an employee being made redundant. It is worded in the following manner: 18. Contributions to ACIRT that are made on terms equivalent to those allowed by the NBCIA and the NSW BCIA will be exempt benefits under section 58PA. 19. Contributions to ACIRT that are made on terms equivalent to those allowed by the EBARC included in any industrial instrument in force under any such law of the Commonwealth or of a State or Territory will be exempt benefits under section 58PA. Commissioner of Taxation 3 December 2008 | Application of section 58PA: 20. When an employer makes a contribution to an approved worker entitlement fund that contribution is an exempt benefit if it meets the requirements of section 58PA. 21. Section 58PA states: | Contribution to an approved worker entitlement fund: 22. Paragraph 58PA(a) requires the contribution be made to an approved worker entitlement fund. Whether the employer makes the redundancy payments to an approved worker entitlement fund is a question of fact. 23. Section 58PB deals with the meaning of approved worker entitlement fund. Subsection 58PB(2) states: 24. ACIRT has been prescribed as an approved worker entitlement fund for the purposes of paragraph 58PB(2)(a). There is no declaration under subsection 58PB(3) in force in relation to this fund. 25. Therefore, any contributions made by an employer to ACIRT will be to an approved worker entitlement fund for the purposes of paragraph 58PA(a). | Contribution made under an industrial instrument: 26. Paragraph 58PA(b) requires that the contributions be made under an 'industrial instrument'. 27. An 'industrial instrument' is defined in subsection 136(1) as a 'law of the Commonwealth or of a State or Territory or an award, order, determination or industrial agreement in force under any such law'. | Contribution made under an award: 28. The NBCIA and also the NSW BCIA are industrial instruments for the purposes of paragraph 58PA(b). Both these awards allow for employers to fund their redundancy obligations through contributions to a fund set up for that purpose, that is, a worker entitlement fund. 29. The use of ACIRT is optional in both the NBCIA and the NSW BCIA. Employers agree to utilise the fund for redundancy liabilities through the use of the 'Deed of Adherence' which creates a legal obligation on the part of the employers. 30. As provided for at clause 8.12 of the Explanatory Memorandum to the Tax Laws Amendment (2005 Measures No. 2) Bill 2005, related legal instruments may be used to determine quantum as well as other relevant matters regarding contributions in terms of the industrial instrument. 31. The 'Deed of Adherence' is an example of a related legal instrument that can be used for such purposes. In the case of an award with a provision equivalent to clause 16.2.7 of the NBCIA, the Deed of Adherence may specify a contribution amount to fund the redundancy entitlement in the award or a greater amount. 32. Therefore any contributions made by employers to ACIRT for redundancy payments arising through the application of the relevant award together with the 'Deed of Adherence' will satisfy the requirements of paragraph 58PA(b). That is, contributions made to ACIRT in these situations will be made under an industrial instrument. | Contribution made under a certified EBA: 33. The redundancy clause provides that redundancy contributions are to be made to ACIRT. These contributions are to fund the employer's redundancy payment obligations. 34. Where an EBA is an industrial instrument, that is, where it is an industrial agreement in force under Australian law, paragraph 58PA(b) will be satisfied. 35. Contributions made to ACIRT under the terms of a certified EBA will be made under an industrial instrument. | Contribution made to ensure that leave or redundancy payment obligation is met: 36. Paragraph 58PA(c) requires that the contribution is either for the purpose of ensuring that an obligation under the industrial instrument to make leave or redundancy payments is met or for the reasonable administrative expenses of the fund. | Obligation for redundancy payments to be made under an award: 37. Under both the NBCIA and the NSW BCIA there is an obligation imposed on the employer to fund redundancy payments, even when those payments are made through the use of a worker entitlement fund. It is a requirement of subparagraph 58PA(c)(i) that this obligation is under the industrial instrument, so this particular requirement is met. 38. Each of the two awards provided are industrial instruments, and as the contributions are made to ACIRT for the purpose of ensuring that an obligation under the award to make leave payments or payments when an employee ceases employment is met, the requirements of paragraph 58PA(c) will be satisfied. | Obligation for redundancy payments to be made under a certified EBA: 39. Under the terms of the EBA the employer has an obligation to make redundancy payments. Where this enterprise bargaining agreement is an industrial instrument subparagraph 58PA(c)(i) will be satisfied. Under the terms of the agreement, contributions to the fund are also made to ensure this obligation is met. 40. The certified EBA provided is an industrial instrument, and as the contributions made to ACIRT are made for the purpose of ensuring that the obligation under the industrial instrument to make leave payments or payments when an employee ceases employment is met, the requirements of paragraph 58PA(c) will be satisfied. | Conclusion on exemption under section 58PA: 41. Contributions made by employers to ACIRT to meet the employer's obligations for redundancy payments arising under either the NBCIA, the NSW BCIA, the certified EBA provided, or equivalent arrangements will be exempt under section 58PA as all the necessary requirements are met. 42. The following is a detailed contents list for this Ruling: Not previously issued as a draft

Ruling: 18. Contributions to ACIRT that are made on terms equivalent to those allowed by the NBCIA and the NSW BCIA will be exempt benefits under section 58PA. 19. Contributions to ACIRT that are made on terms equivalent to those allowed by the EBARC included in any industrial instrument in force under any such law of the Commonwealth or of a State or Territory will be exempt benefits under section 58PA. Commissioner of Taxation 3 December 2008


Appendix: Application of section 58PA: 20. When an employer makes a contribution to an approved worker entitlement fund that contribution is an exempt benefit if it meets the requirements of section 58PA. 21. Section 58PA states: | Contribution to an approved worker entitlement fund: 22. Paragraph 58PA(a) requires the contribution be made to an approved worker entitlement fund. Whether the employer makes the redundancy payments to an approved worker entitlement fund is a question of fact. 23. Section 58PB deals with the meaning of approved worker entitlement fund. Subsection 58PB(2) states: 24. ACIRT has been prescribed as an approved worker entitlement fund for the purposes of paragraph 58PB(2)(a). There is no declaration under subsection 58PB(3) in force in relation to this fund. 25. Therefore, any contributions made by an employer to ACIRT will be to an approved worker entitlement fund for the purposes of paragraph 58PA(a). | Contribution made under an industrial instrument: 26. Paragraph 58PA(b) requires that the contributions be made under an 'industrial instrument'. 27. An 'industrial instrument' is defined in subsection 136(1) as a 'law of the Commonwealth or of a State or Territory or an award, order, determination or industrial agreement in force under any such law'. | Contribution made under an award: 28. The NBCIA and also the NSW BCIA are industrial instruments for the purposes of paragraph 58PA(b). Both these awards allow for employers to fund their redundancy obligations through contributions to a fund set up for that purpose, that is, a worker entitlement fund. 29. The use of ACIRT is optional in both the NBCIA and the NSW BCIA. Employers agree to utilise the fund for redundancy liabilities through the use of the 'Deed of Adherence' which creates a legal obligation on the part of the employers. 30. As provided for at clause 8.12 of the Explanatory Memorandum to the Tax Laws Amendment (2005 Measures No. 2) Bill 2005, related legal instruments may be used to determine quantum as well as other relevant matters regarding contributions in terms of the industrial instrument. 31. The 'Deed of Adherence' is an example of a related legal instrument that can be used for such purposes. In the case of an award with a provision equivalent to clause 16.2.7 of the NBCIA, the Deed of Adherence may specify a contribution amount to fund the redundancy entitlement in the award or a greater amount. 32. Therefore any contributions made by employers to ACIRT for redundancy payments arising through the application of the relevant award together with the 'Deed of Adherence' will satisfy the requirements of paragraph 58PA(b). That is, contributions made to ACIRT in these situations will be made under an industrial instrument. | Contribution made under a certified EBA: 33. The redundancy clause provides that redundancy contributions are to be made to ACIRT. These contributions are to fund the employer's redundancy payment obligations. 34. Where an EBA is an industrial instrument, that is, where it is an industrial agreement in force under Australian law, paragraph 58PA(b) will be satisfied. 35. Contributions made to ACIRT under the terms of a certified EBA will be made under an industrial instrument. | Contribution made to ensure that leave or redundancy payment obligation is met: 36. Paragraph 58PA(c) requires that the contribution is either for the purpose of ensuring that an obligation under the industrial instrument to make leave or redundancy payments is met or for the reasonable administrative expenses of the fund. | Obligation for redundancy payments to be made under an award: 37. Under both the NBCIA and the NSW BCIA there is an obligation imposed on the employer to fund redundancy payments, even when those payments are made through the use of a worker entitlement fund. It is a requirement of subparagraph 58PA(c)(i) that this obligation is under the industrial instrument, so this particular requirement is met. 38. Each of the two awards provided are industrial instruments, and as the contributions are made to ACIRT for the purpose of ensuring that an obligation under the award to make leave payments or payments when an employee ceases employment is met, the requirements of paragraph 58PA(c) will be satisfied. | Obligation for redundancy payments to be made under a certified EBA: 39. Under the terms of the EBA the employer has an obligation to make redundancy payments. Where this enterprise bargaining agreement is an industrial instrument subparagraph 58PA(c)(i) will be satisfied. Under the terms of the agreement, contributions to the fund are also made to ensure this obligation is met. 40. The certified EBA provided is an industrial instrument, and as the contributions made to ACIRT are made for the purpose of ensuring that the obligation under the industrial instrument to make leave payments or payments when an employee ceases employment is met, the requirements of paragraph 58PA(c) will be satisfied. | Conclusion on exemption under section 58PA: 41. Contributions made by employers to ACIRT to meet the employer's obligations for redundancy payments arising under either the NBCIA, the NSW BCIA, the certified EBA provided, or equivalent arrangements will be exempt under section 58PA as all the necessary requirements are met.


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. | A redundant employee shall receive redundancy/severance payments, calculated as follows... | An employer bound by this award may utilise a fund to meet all or some of the liabilities created by this clause. Where an employer utilises such a fund: | Redundancy or redundant means the termination or cessation of employment of an Employee for any reason. | In respect of redundancy benefits: | Where there is a higher entitlement under (b)ii) and or (b)iii) of this clause the Employee will be paid direct this entitlement minus the balance that has already been paid into ACIRT by the Company for this period of employment. | the contribution is an exempt benefit. | A fund is also an approved worker entitlement fund if: | Contribution made to ensure that leave or redundancy payment obligation is met 36 Obligation for redundancy payments to be made | Obligation for redundancy payments to be made under a certified EBA 39 Conclusion on exemption under section 58PA | Appendix 2 - Detailed contents list


Related rulings: CR 2007/28 CR 2007/55 TR 2006/10
Legislative references: FBTAA 1986 FBTAA 1986 58PA FBTAA 1986 58PA(a) FBTAA 1986 58PA(b) FBTAA 1986 58PA(c) FBTAA 1986 58PA(c)(i) FBTAA 1986 58PB FBTAA 1986 58PB(2) FBTAA 1986 58PB(2)(a) FBTAA 1986 58PB(3) FBTAA 1986 136(1) TAA 1953 Copyright Act 1968
Subject references: exempt benefits fringe benefits tax worker entitlement funds
Other references: Explanatory Memorandum to the Tax Laws Amendment (2005 Measures No. 2) Bill 2005