LAST week’s Federal Budget included little of note on employment and workplace relations matters, seeking instead to position the Coalition strongly for a Federal Election campaign based on tax.
While company tax cuts are of benefit to the business community and national economy more broadly, there was also little in the way of resources and energy sector specific measures.
Nonetheless, the below analysis (provided by the Australian Chamber of which AMMA is a long-time Association Member), delivers an overview of key take-outs on employment and workplace-related matters.
Wages and Prices Growth
The budget forecasts a return to pressures on wages, and for wage growth to return towards longer term trend levels. Budget Paper 1 at p.2-22 indicates:
Wage growth is forecast to pick up to 2¼ per cent through the year to the June quarter 2018, 2¾ per cent through the year to the June quarter 2019 and 3¼ per cent through the year to the June quarter 2020, as economic growth strengthens to be above its potential rate and excess capacity in the labour market is absorbed.
On inflation, Budget Paper 1 indicates at p.2-23
Inflation is expected to rise gradually over the forecast horizon as economic growth accelerates and wage growth picks up. Through-the-year growth in consumer prices is forecast to be 2 per cent in the June quarter 2018, 2¼ per cent in the June quarter 2019 and 2½ per cent in the June quarter 2020.
Registered Organisations Commission (ROC)
The ROC will be allocated an additional $8.1 million over four years to perform the additional functions arising from the Fair Work (Registered Organisations) Amendment Act 2016 and the Fair Work Amendment (Corrupting Benefits) Act 2017. This will be used for regulation, enforcement and education, including the new whistleblower protection regime and the registration of auditors of registered organisations. Budget Paper 2, at p.159.
Other portfolio agencies
There do not appear to have been other significant changes to the regular budgets of portfolio agencies. The staffing allocations of the ABCC and FWC are unchanged, the combined headcount of the FWO and ROC will increase from 736 to 745 (the bulk of which may join the ROC, see above) and there is a minor increase in the staffing of Safe Work Australia from 96 to 101. Budget Paper 4, p.183.
There are special appropriations to the FWC ($500,000) and FWO ($275,000), see Budget Paper 4, p.141. The purpose for these allocations is not yet clear, and information will be circulated in due course.
Fair Entitlements Guarantee (FEG)
The Budget foreshadows reforms to address corporate misuse of the Fair Entitlements Guarantee (Budget Paper 2, p.38). This appears set to progress a process commenced in 2017.
Phoenixing and Black Economy
The Budget provides an additional $40m over three years to combat illegal phoenix activity (when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts). (Budget Paper 2, p.37). This will encompass:
- New offences to target those who conduct or facilitate illegal phoenixing.
- Preventing directors improperly backdating resignations to avoid liability or prosecution.
- Limiting the ability of directors to resign when this would leave the company with no directors.
- Restricting the ability of related creditors to vote on the appointment, removal or replacement of an external administrator.
- Extending the Director Penalty Regime to GST, luxury car tax and wine equalisation tax, making directors personally liable for the company’s debts.
- Expanding the ATO’s power to retain refunds where there are outstanding tax lodgements.
The ATO will also gain new powers for enforcement against various dimensions of the black economy. The Taxable Payments Reporting System (TPRS) is an integrity measure that already operates in the building and construction industry. It is now to be extended to:
- Security providers and investigation services.
- Road freight transport.
- Computer system design and related services.
- Cleaning and couriers. (Budget Paper 2, p.22).
Businesses will not be able to claim deductions for:
- Payments to their employees such as wages where they have not withheld any amount of PAYG from these payments, despite the PAYG withholding requirements applying.
- Payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG despite the withholding requirements applying.
This is consistent with Black Economy Taskforce recommendations and will have effect from 1 July 2019.
Superannuation non-compliance
The government continues to bear down on unpaid superannuation guarantee contributions, and it can be expected that an alternative government would continue and perhaps intensify that focus. It is regrettable that neither the government nor the opposition is prepared to look at the role of the dysfunctional SG penalty system in increasing unpaid SG debt and reducing recovery, but the Australian Chamber will continue to work away at this.
The Budget announces $133.7m to continue and expand its targeted strategies to increase and bring forward SG and GST debt collection (p 19). This should be understood in the context of increasingly targeted enforcement by the ATO and the ATO’s growing data matching capability.
Budget announcements also contribute to improving the efficient conversion of contributions into a member’s retirement asset base. From 1 July 2019, exit fees will be banned, removing a disincentive to choose a new fund; there will be a 3% annual cap on passive asset fees on accounts with less than $6,000 and inactive accounts under $6,000 will have to be transferred to the ATO (p 35). The ATO is able to consolidate the majority of these inactive account balances with the person’s active account through data matching.
The Budget also announced that from 1 July 2018 individuals whose income is above $263,157 with more than one employer can “…nominate that their wages from certain employers are not subject to the superannuation guarantee.” (p 40) This measure is something which the Australian Chamber has proposed because the individual employer contributions take the employee above the concessional contributions cap, which means that unnecessary contributions are paid which the employee then has to have reversed. However it will be important to get the process right.
The Budget has also announced an additional $15m over three years from 2018-19 to the ATO “…to support small businesses with fewer than 20 employees during the transition to Single Touch Payroll Reporting from 1 July 2019.” (p 185) This is a timely reminder that STP, which requires employers to report wages and superannuation contributions to the ATO when paid, is coming and it will make the superannuation contributions system much more transparent in near real time. Funds also report contributions when they are allocated to the member which enables the ATO to data match. The nature of the support is not clear from the announcement.
Modern Slavery
The Budget signals the government’s strong intentions on its foreshadowed Modern Slavery Act, which will require large businesses and organisations to report on their actions to ensure their operations and supply chains are free of modern slaves (psychologically, financially or physically compelled labour, trafficked people) – “Modern Slavery Reporting Requirement” (Budget Paper 2, p 127). The Budget announcement is a continuation from the Treasurer’s announcement in the 2017 MYEFO (p 138) that the Government will introduce a “…relevant reporting regime for relevant companies to encourage a stronger focus on eradicating modern slavery in the supply chain.”
The initial 2017-18 introduction costs were borne by Attorney-General’s (the then responsible department).
The Budget has now allocated $3.6m over four years to the Department of Home Affairs to establish an Anti-slavery Unit within the Department. The Unit will manage the implementation of the Modern Slavery Reporting Requirement and is intended to support businesses in mitigating risks and contributing to the national effort to combat modern slavery both within and outside Australia.
More broadly, the Department of Home Affairs will receive $130m in the current financial year to upgrade its ITC systems (Budget Paper 2, p 204). This may impact the VEVO (Visa Entitlement Verification Online) system which already can be accessed by downloadable phone app. The upgrade will improve the Department’s data matching capabilities.
For more information or comment on any of the Budget analysis contained within this article, contact [email protected]
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