Income tax: Parks Victoria Voluntary Departure Program 2012-13 / 2013-14 Early Retirement Scheme

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.

The relevant provisions dealt with in this Ruling are: • Section 83-170 of the Income Tax Assessment Act 1997 (ITAA 1997); and • Section 83-180 of the ITAA 1997. All legislative references are to the ITAA 1997 unless otherwise indicated.

The class of entities to which this Ruling applies is those employees of Parks Victoria, shown at paragraph 15, who receive a payment under the scheme described in paragraphs 10 to 39 of this Ruling.

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 39 of this Ruling.

If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: • this Ruling has no binding effect on the Commissioner because the scheme entered into is not the scheme on which the Commissioner has ruled; and • this Ruling may be withdrawn or modified.

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This Ruling applies from 5 June 2013' to 30 June 2014. The Ruling continues to apply after 30 June 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).

Class Ruling CR 2012/89

The following description of the scheme is based on information provided by the applicant.

Parks Victoria is seeking the Commissioner's approval to implement a second round of expressions of interest for a voluntary departure package (VDP) under an early retirement scheme in accordance with section 83-180.

The scheme will be titled 'Parks Victoria Voluntary Departure Program 2012-13 / 2013-14', referred to as the Scheme.

Parks Victoria is a statutory agency of the Victorian Government and provides park and waterway management services, and provides resources to support the Victorian Government's public land fire and emergency management.

In 2010-11, a review of the financial sustainability of Parks Victoria was undertaken. A key recommendation of the review was to reduce labour expenditure through workforce management.

In order to achieve the savings, Parks Victoria will introduce a new organisational structure to reflect a reduction in its workforce and re-prioritisation of work in a number of areas.

The purpose in implementing the Scheme is to rationalise and re-organise the employer's operations and will assist Parks Victoria in employment reductions in areas predominantly from corporate divisions, management and administrative functions so as to minimise the impact on direct on-ground park and waterway service delivery and bushfire management and delivery and response activities.

The class of employees to whom the Scheme applies is employees of Parks Victoria who have ongoing employment status on the first day expressions of interest are open. The criteria applying to the second round will be consistent with the criteria undertaken as part of the first round.

Participation in the Scheme is entirely voluntary.

All eligible employees under the Scheme will be offered a lump sum payment as follows: (a) Four weeks' pay in lieu of notice on cessation; (b) A lump sum voluntary departure incentive of up to $10,000 (for a full-time employee); (c) Two weeks' pay per completed year of continuous service in the Victorian Public Sector, up to a maximum of 15 years.

For part-time employees, payments (a) and (b) will be calculated at the part-time rate. For employees who have a period of part-time employment in the most recent years of continuous service, payment (c) will be a pro-rata payment.

Where an employee who is offered a voluntary departure package (VDP) has less than one year's service, they will receive a corresponding fraction of the VDP they would have been paid at one year.

All employees terminated under the Scheme will receive their accrued annual leave and unused long service leave entitlements in accordance with the relevant enterprise agreement. However, they do not form part of the payment made under the Scheme.

The maximum number of VDPs available under the second round for eligible staff of Parks Victoria is limited.

Where the number of employees seeking access to the Scheme exceeds the number of packages specified as available in a particular category, an offer will be made to those eligible employees within a category who have the longest period of continuous service with the Victorian Public Sector.

Parks Victoria may give consideration to allowing more VDPs from areas that are oversubscribed if there are areas that are undersubscribed until the maximum number of packages have been exhausted.

Under the second round staff in the following positions within Parks Victoria will not be eligible to participate in the Scheme. They are: • Executive Officers employed on an Executive Officer contract; • Fixed term employees; • Casual employees; • Employees who have resigned in writing prior to the first day expressions of interest open; or • Employees who are on probation or other trial arrangements or who are recipients of Work cover salary payments (this does not include employees on Work cover who have returned to work on full pre-injury duties).

In addition, staff in the following Divisions/Directorate are excluded from participating under the second round of the Scheme. They are: Division/Directorate Position/role Corporate Services Division • Manager People and Culture • HR Systems and Payroll team staff • Manager Employee Relations • Manager Occupational Health and Safety • Senior Management Accountant • Manager Corporate Finance Legal and Governance Directorate • Manager Corporate Governance • Legal Administrative Officer and FOI Officer • Insurance and Risk Officer • Corporate Solicitor • Senior Legal Counsel Visitor Experiences Division • Senior Commercial Projects Officer • Senior Commercial Operations Officer • Manager Commercial Services • Manager Commercial Operations • Planning Officer Recreation • Team Leader Community Consultation and Engagement • Marketing Coordinator • Manager Marketing and Coordination • Manager Asset Strategy and Risk • Project Manager New Urban Parks • Team Leader Recreation Planning • Manager Tourism • Licence Liaison Officer • Director Visitor and Asset Strategy and Planning Regional Services Division • Fire Operations Officers • Fire and Environment Program Officers • Manager, Compliance • Project Officer, Compliance Services • Eastern Region: - Customer Service Officer, Buchan Caves Commercial - State Coal Mine Operations Manager - Water and Waste Water Treatment, Wilsons Prom - Visitor Services Coordinator, Wilsons Prom - Maintenance Supervisor, Wilsons Prom • Melbourne Region: - Horticultural specialist, Albert Park - Senior Horticultural Ranger, Werribee Park - Education Officer, Dandenongs/Yarra Ranges District - Specialist Horticultural Senior Officer, Albert Park - Event and Venue Administrator, Albert Park - Sports Liaison Manager, Albert Park - Senior Strategic Planner, Melbourne Region - Planner, Mornington Peninsula District - Marine Planner - Manager, Maritime Infrastructure - Dive Master - Marine Parks specialist. Port Phillip Bay and Westernport District - Heritage Planner, Point Nepean - Melbourne Bushfire Protection Program staff - Horticulturalist specialists in the Dandenongs - capped at 1 in the Dandenongs/Yarra Ranges District • Northern Region: - Program Coordinator, Team Leader and Rangers, Yorta Yorta Caring for Country - Licence Officer, River Red Gum Coordination - Environmental Scientist, River Red Gum Coordination - Environment Program Manager, North West District Office - Project Officer, North West District Office - Project Manager, North West District Office - Heritage Maintenance Officer, North Central District - Ranger Team Leaders, Murray Sunset National Park - Team Leader Water, Northern Rivers District • Western Region: - Ranger Program Coordinator Marine, West Coast District Office - District Program Coordinator, West Coast District Office - Ranger Team Leader, Glenelg Gunditj - Program Coordinator, South West District Office - Natural Values Project Manager, South West District Office - Flood Recovery Coordinator, Grampians - Ranger, Wildlife, You Yangs - Port Philip RAMSAR Site Partnerships Coordinator • All employees who undertake fire roles, who are formally accredited and have exercised that accreditation during the last 2 years. Chief Executive Office • All staff.

Following approval of the second round under the Scheme, eligible employees will be invited to express an interest in the Scheme and will have 14 calendar days from the announcement of the Scheme to express an interest in the Scheme.

Once an eligible employee has expressed an interest, an offer will be made within 21 calendar days from the closing date of the expression of interest.

If a class of employee is over-subscribed and an employee rejects an offer, the next employee, as determined by the criteria, will be made an offer until the stated quota is filled, or all applicants in that particular category have received an offer.

Employees will have 14 calendar days to consider the offer and make a decision to accept or reject the offer.

Employees who accept an offer to retire under the Scheme will generally be required to cease employment within 21 calendar days. However, an alternative exit date may be determined by mutual agreement between the employer and agreed with the employee due to organisation requirements after acceptance of the offer.

All eligible employees who accept an offer will receive the package and terminate employment no later than 30 June 2014.

The second round under the Scheme will be implemented from the date after the Commissioner's approval to 30 June 2014.

The payments made under the Scheme do not include any payment in lieu of superannuation benefits.

The payments made under the Scheme will be at arm's length.

Recipients of the Scheme are required to agree not to seek or accept re-employment or any other fee for service from any Victorian Public Service Sector employer for a minimum of three calendar years from the date of their separation.

The retirement of employees who receive a payment under the Scheme will occur before they turn 65 years of age.

Staff aged 65 and older will be eligible to participate in the Scheme, however for payments made to eligible employees who have reached age 65 and older the payments will not be an early retirement scheme payment and will not be eligible for the tax free base limits under the Scheme. These payments will be concessionally taxed as employment termination payments.

All eligible employees are employed under the Parks Victoria Workplace Determination 2013.

The scheme to be implemented under the second round by Parks Victoria is an early retirement scheme for the purposes of section 83-180.

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.

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.

Where a scheme satisfies the requirements of subsection 83-180(3), that scheme will be an early retirement scheme.

Subsection 83-180(3) states that: A scheme is an early retirement scheme if: (a) all the employer's employees who comprise such a class of employees as the Commissioner approves may participate in the scheme; and (b) the employer's purpose in implementing the scheme is to rationalise or re-organise the employer's operations by making any change to the employer's operations, or the nature of the work force, that the Commissioner approves; and (c) before the scheme is implemented, the Commissioner, by written instrument, approves the scheme as an early retirement scheme for the purposes of this section. These three conditions are discussed below.

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).

The class of employees to whom early retirement will be offered is set out in paragraph 16 of this Ruling.

The Commissioner considers that this is an appropriate class of persons for the Scheme to 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 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).

The facts at paragraphs 12 to 15 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 therefore considered 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 is proposed to operate for a period from ( the date after the Commissioner's approval ) to 30 June 2014. The approval provided by this class ruling has been granted prior to implementation therefore for the purposes of paragraph 83-180(3)(c), this condition is satisfied.

The Scheme will be in operation for approximately 13 months. This is considered appropriate due to the circumstances of the restructure and the employees that will be given the option of early retirement under the Scheme.

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 termination is an early retirement scheme payment.

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)): • the retirement occurred before the employee turned age 65 or such earlier date on which the employee's employment would have terminated under the terms of employment because of the employee attaining a certain age or completing a particular period of service (as the case may be); • if the employee and the employer are not dealing with each other at arm's length (for example because they are related in some way) the payment does not exceed the amount that could reasonably be expected to be made if the retirement was made at arm's length; • at the time of retirement there was no arrangement between the employee and the employer, or between the employer and another person, to employ the employee after the retirement; • the payment must not be made in lieu of superannuation benefits; • it is not a payment mentioned in section 82-135 (apart from paragraph 82-135(e)).

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'.

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.

For the 2012-13 income year, the tax free amount is limited to $8,806 (base amount) plus $4,404 (service amount) for each whole year of completed employment service to which the early retirement scheme payment relates. It should be noted that 6 months, 8 months or even 11 months do not count as a whole year for the purposes of this calculation. In accordance with section 960-285, the base limit and service amount limits will be indexed in line with average weekly ordinary time earnings for each income year.

The total of the amount received on the termination of employment calculated in accordance with paragraphs 18 to 20 of this ruling may qualify as an early retirement scheme payment.

The total payment calculated in accordance with paragraph 57 of this ruling will be measured against the limit calculated in accordance with the formula mentioned in paragraph 56 of this ruling to determine the 'tax free' amount of the early retirement scheme payment.

The 'tax free' amount will: • not be an employment termination payment; and • not be able to be rolled-over into a superannuation fund.

Any payment in excess of this limit will be an employment termination payment and split up into tax free and taxable components. The tax free component of an employment termination payment includes the pre-July 83 segment of the payment. The tax free component is not assessable income and is not exempt income.

The following is a detailed contents list for this Ruling: Paragraph What this Ruling is about 1 Relevant provision(s) 2 Class of entities 3 Qualifications 4 Date of effect 7 Previous rulings 8 Scheme 9 Ruling 40 Appendix 1 - Explanation 43 All employees within a class approved by the Commissioner may participate in the scheme 45 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 48 The scheme must be approved by the Commissioner prior to its implementation 50 Other relevant information 52 Appendix 2 - Detailed contents list 61