Circular 1996/14: Voluntary retrenchment - Staff movement (Job swaps) within and between APS agencies and the taxation treatment of subsequent redundancy payments

Please note: This document is for reference purposes only and is no longer considered by the APS Commission to be current. It may contain good practice advice and/or advice on the transitional arrangements between the 1922 and 1999 Public Service Acts.

Purpose

The purpose of this circular is to clarify:

the circumstances in which staff can be transferred within and between agencies to receive an offer of voluntary retrenchment in accordance with the Redeployment and Retirement provisions; and
the taxation treatment of benefits paid on voluntary retrenchment.

Who is covered by the Redeployment and Retirement provisions?

2. The Redeployment and Retirement provisions of the APS General Employment Conditions Award 1995 (GECA) and the Continuous Improvement in the APS Enterprise Agreement: 1995-96 detail the legal obligations of departments in relation to the management of excess staff situations. Action cannot be taken under these provisions in relation to an employee unless the employee falls or is likely to fall within the definition of an excess employee.

3. In an excess staff situation, an agency is under an obligation to resolve the matter by the redeployment or retirement of the excess employee(s). The provisions are not a mechanism for unaffected APS staff to pursue voluntary retrenchment.

Transfer of staff within an agency

4. Decisions on who will be made an offer of voluntary retrenchment are for management to make and not staff. However, under subparagraph 11.4.12.(b) of GECA a Secretary may invite other employees of the agency from outside the affected area to express interest in voluntary retrenchment where their retirement would permit the redeployment of an excess employee who does not wish to accept voluntary retrenchment and would otherwise remain excess. In this regard it is also important to note that under subparagraph 11.4.12.(a) of GECA a Secretary must not involuntarily retire an employee where:

there is another employee of the agency at the same level, doing the same work, in the same location, who has accepted a formal invitation under GECA to take voluntary retrenchment; and
despite that acceptance, that employee has been refused voluntary retrenchment; and
the employee still wishes to be retired.

5. These are the only circumstances in which the Redeployment and Retirement provisions enable an employee not in an excess staff situation to become excess and to be voluntarily retrenched.

Transfer of staff between agencies

6. The transfer of an employee from one agency to a vacancy in another is at the discretion of the Secretaries concerned, not at the election of the employee. Only in exceptional circumstances has this power been used to exchange employees between agencies. For example, it has occurred where the transfers are part of a staff development or mobility program.

7. If two Secretaries are prepared to exercise their discretion, on a case by case basis, to facilitate a "job swap" by the transfer of both an employee who is willing to take voluntary retrenchment and an employee who is pursuing redeployment in the APS then the decision to do so should be made :

on operational grounds; and
on the basis that the employee to be retained is able to effectively perform the duties of the position.

8. The Public Service Commissioner's power under section 51(3) of the Public Service Act 1922 (the Act) to transfer employees from one agency to another is limited to circumstances where such action is in the interests of the efficient administration of the APS, and can only be exercised after consulting with the Secretary of each of the agencies concerned. The Commissioner does not consider that it is appropriate or necessary to exercise this power in order to broker exchanges between agencies. This is a matter for Secretaries to consider on a case by case basis.

Taxation treatment of severance payments made to staff who are transferred between agencies

9. Previous advice from the Commissioner of Taxation indicated that a severance payment paid to an employee dismissed from a job by reason of his or her redundancy would qualify as a bona fide redundancy payment if the Secretary certified that:

the agency (or a section or area of the agency) where the officer works has been reorganised; and
as a consequence of that reorganisation the number of jobs in the agency is reduced and the officer dismissed.

10. The Australian Taxation Office (ATO) has now provided specific advice about whether a payment made to an employee who is voluntarily retrenched following a "job swap" between agencies constitutes a bona fide redundancy payment for taxation purposes. The ATO has advised that in circumstances where a "job swap" represents the best way to manage the redundancy process and a Secretary certifies that all the conditions in paragraph 11 below are met, the payment to the affected employee will be accepted as a bona fide redundancy payment.

11. In these circumstances, the following conditions must be satisfied for the severance benefit to be accepted as a bona fide redundancy payment:

there is an excess employee who is an occupant of a position which is to be abolished and the employee does not wish to accept voluntary retrenchment;
there is a position, for which the employee is considered suitable, in another agency which is occupied by an employee who does wish to receive an offer of voluntary retrenchment;
the Secretaries of the respective agencies agree to a transfer of the two employees under normal transfer powers (section 50 of the Act);
the transfer of the second employee into the position which is to be abolished has taken effect and following this he or she is offered and subsequently accepts voluntary retrenchment; and
the position is then abolished.

12. It is important to note that the Secretary retiring the employee will be required to certify that all of the conditions in paragraph 11 have been met for a payment to be accepted as a bona fide redundancy payment by the Commissioner of Taxation.

Further information

13. Enquiries about the taxation issues covered in this circular should be directed to the ATO. The contact officer is Leon Latimore on (02) 6216 3720 .

14. Other queries should be directed to the PSMPC Hotline on (02) 6202 3859.

Richard Harding
Structural Change Team Leader

June 1996

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