A Chain Reaction: Modern Slavery Bill Under Consideration

 

Daniel McNamara, Graduate Associate

On 17 September 2018, the House of Representatives passed the Modern Slavery Bill 2018 (Cth) (the “Commonwealth Bill”) which is currently before the Senate.

Background

While there is no set definition of “modern slavery”, it is regarded as the full or partial servitude of people which can involve “human trafficking, slavery, forced labour, removal of organs and slavery-like practices”.1 For large businesses operating in Australia, a risk of modern slavery may arise within the supply chain of producing goods and services, as has occurred with respect to forced labour in the agriculture and construction industries. Another scenario that has given rise to concerns is where a business allows (or turns a blind eye to) workers paying off “debts” owed to others by working indefinitely without being paid a wage.

Since 2004, over 50 prosecutions have occurred in relation to modern slavery under the Criminal Code Act 1995 (Cth).2 However, the liability and accountability of large entities within Australia remains limited due to the lack of legislation requiring entities to conduct due diligence in preventing modern slavery throughout entities. The result is that instances of modern slavery within organisations’ supply chains, operations and structures may fail to be recognised or no preventative action is taken. With this in mind, in February 2017, the then-Commonwealth Attorney General, George Brandis, requested the Joint Standing Committee on Foreign Affairs, Defence and Trade, to consider the introduction of modern slavery legislation in Australia.

Amongst other things, the Joint Standing Committee drew closely on the 2015 legislation introduced in the United Kingdom, as well as considering 225 public submissions and conducting 10 public hearings between May and October 2017. If it is enacted, the Commonwealth Bill will be the first piece of federal legislation to deal with modern slavery.

Nature of the obligations

The sole requirement of the Commonwealth Bill is the obligation of entities with a consolidated revenue of at least $100 million to publish modern slavery statements relating to the potential risks that exist in their operations and supply chains in relation to potential modern slavery.3

Unlike the Modern Slavery Act 2018 (NSW) (the “NSW Act”) introduced earlier this year, which imposes a penalty of up to 10,000 penalty units ($1.1 million) for failure to file a compliance statement,4 the Commonwealth Bill has no such sanctions. Instead, the Commonwealth Bill takes a “soft line” on enforcement. As Senator Nigel Scullion stated in the Second Reading Speech for the Bill, “[b]usinesses that fail to take action will be penalised by the market and consumers and severely tarnish their reputations”.5

How might this affect your business?

As compliance with the Commonwealth Bill will require an organisational level approach to assessing risk, human resource managers may be required to contribute to the process of producing modern slavery statements. Amongst other things, this will involve identifying the structure, operations and supply chains of the reporting entity, the risks of modern slavery throughout the entity’s operations and supply chain, assessing any risks and taking appropriate action.6

For NSW businesses, the requirement of a modern slavery statement as prescribed by the NSW Act is removed if the organisation is subject to a “law of the Commonwealth … that is prescribed as a corresponding law”.7 It is not yet clear whether the prospective Commonwealth legislation will be a “corresponding law” to the NSW Act, meaning that NSW businesses may be required to produce modern slavery statements on both a state and a federal level to satisfy both reporting regimes.

Key takeaways

  • Businesses with a consolidated revenue of at least $100 million should consider their strategies for producing a modern slavery statement that reflect the risks within their operations and supply chains to comply with the Commonwealth Bill.
  • There are no pecuniary penalties in the Commonwealth Bill for non-compliance.
  • NSW businesses may be subject to both Commonwealth and state compliance requirements in creating modern slavery statements.

The Devil is in the Detail: New Model Term on Flexible Working Arrangements

Therese MacDermott, Consultant and Rohan Burn, Graduate Associate

As part of the four-yearly review of modern awards, the Full Bench of the Fair Work Commission (“FWC”) has recently published a provisional model term that supplements the flexible working arrangement provisions of the Fair Work Act 2009 (Cth) (“FW Act”) (the “Model Term”).

This follows the FWC’s decision in March 2018 where it rejected a major overhaul of the right to request flexible working arrangements on the basis that what was being sought would effectively remove the ability of businesses to determine how to roster labour.

While acknowledging there was a significant unmet employee need for flexible working arrangements, the FWC settled on an approach that would see a model term incorporated into modern awards that would “facilitate” arrangements and raise awareness of the right, rather than offering an avenue to challenge a denial of a request. Hence, the end result is a proposed model term that sets out the process an employer must follow if it is responding to a request and gives the FWC a degree of supervision over this process, but no decision-making role in relation to the underlying decision to refuse the request.

Further submissions relating to any award-specific issues will be made within the next two weeks. Subject to these submissions, it is the FWC’s provisional view that all modern awards should be varied to insert the Model Term. That provisional view will only be displaced in respect of any particular modern award if it is demonstrated that there are matters or circumstances particular to that modern award that do not necessitate the inclusion of the Model Term.

Flexibility requests under the FW Act

Under section 65 of the FW Act:

  • an eligible employee may make a written request for a change in working arrangements which sets out the details of the change sought and the reasons for the change;
  • the employer must give the employee a written response to the request within 21 days, stating whether the employer grants or refuses the request;
  • the employer may refuse the request only on reasonable business grounds; and
  • if the employer refuses the request, the written response must include details of the reasons for the refusal.

Under this scheme an employer’s decision to refuse a request for a flexible working arrangement is not subject to any review or appeal. As a result, the FWC is unable to deal with a dispute about whether an employer had “reasonable business grounds” for refusing the request unless the parties have agreed in a contract of employment, enterprise agreement or other written agreement that the FWC can deal with the matter.

What will change with the Model Term

The proposed Model Term will apply to all categories of employees who make a request under section 65 of the FW Act, and is not confined to parents and carers only.

Of particular importance for employers are the following process aspects:

  1. before responding to the request, the employer must discuss the request with the employee and “genuinely try to reach agreement” on a change in working arrangements that will reasonably accommodate the employee’s circumstances having regard to:
    1. the needs of the employee arising from their circumstances;
    2. the consequences for the employee if changes in working arrangements are not made; and
    3. any reasonable business grounds for refusing the request;
  2. the written response to the request must include details of the reasons for the refusal, including the business ground(s) for the refusal and how the business ground(s) apply;
  3. if the employer and employee cannot agree (at (1) above) on a change in working arrangements, the written response must:
    1. state whether or not there are any changes in working arrangements that the employer can offer the employee so as to better accommodate the employee’s circumstances; and
    2. if the employer can offer the employee such changes in working arrangements, set out those changes in working arrangements;
  4. if the employer and the employee reached an agreement (at (1) above) on a change in working arrangements that differs from that initially requested by the employee, the employer must provide the employee with a written response to their request setting out the agreed change(s) in working arrangements; and
  5. disputes about whether the employer has discussed the request with the employee and responded to the request (as required) are to be dealt with under the consultation and dispute resolution clauses of the modern award.

As a consequence, a dispute resolution clause can only be relied on in respect of a dispute about whether the employer has discussed the request with the employee and responded to the request, rather than the substantive decision whether to grant the request.

Implications

While the Model Term (for the most part) may already reflect the practices that organisations engage in, it does:

  • require employers to be mindful of the level of genuine deliberation and consultation they engage in with employees in responding to requests; and
  • increase the regulatory burden in administering requests.

It is also likely that organisations may find that, in the bargaining context, employees (or their bargaining representatives) seek to build on the Model Term and expand its scope to include disputes about whether an employer had “reasonable business grounds” to refuse the request within the dispute resolution clause.

PCS recommends that organisations update staff who are responsible for dealing with these requests (particularly line managers) about these proposed changes and any practices that may need to be revisited as a result of these changes.

Organisations should also consider the impact of these changes on employees who are not award covered and consider whether it will treat all employee requests in accordance with the proposed Model Term, or whether it will adopt different approaches for requests by award and non-award employees.

It’s What’s Inside that Counts: Dealing with Disgruntled Ex-Employees

Rohan Burn, Graduate Associate

Last fortnight the Queensland Strawberry Growers Association released a statement saying they had reason to suspect that a disgruntled ex-employee may have orchestrated a recent newsworthy incident where sewing needles were found in a number of strawberries.

This incident has caused employers to reflect on the commercial, reputational, and legal risks that arise from current and former employees who may be unhappy with their work environment. To mitigate against these risks, there are a number of proactive strategies that an employer can implement to protect their reputation and deter employees from breaching their obligations.

Reputational Damage

Building a reputable organisation takes years of time, dedication and vision, and just minutes to destroy. It takes just one employee, for example by sharing negative feedback online or breaching work health and safety obligations, to disrupt that reputation. Trust and respect within an organisation are crucial to mitigating against the risks and potential damage that a disgruntled employee may cause. Employers need to focus on creating and maintaining a healthy workplace culture and addressing behaviours that fall foul of acceptable conduct.

Employee Management

Appropriate performance management processes encompass both a risk management strategy and a mechanism for improving the performance of employees. Employers should provide employees with regular opportunities to discuss and respond to concerns as well as achievements. Ongoing communication facilitates a more transparent and mutually beneficial approach, where an employee is aware of and can align their performance and behaviours with an employer’s expectations and organisational values.

Where employees perceive performance management as inherently negative, the employer limits performance management to a process with a forgone conclusion; exiting an employee. In these circumstances, employees may feel unsupported by their employer and aggrieved by being labelled as a “poor performer”. Terminating an employee’s employment when they have a perception of organisational injustice can expose the business to additional risks, particularly if the employee is serving out any remaining notice period or has a “story” the media might be interested in.

The People Management Quadrants

The People Management Quadrants represent a holistic approach to the management of people issues in the workplace. Instead of only focussing on commercial outcomes and how they can be achieved within the law, employers should also consider what people may be feeling and thinking about an issue, and what message is being conveyed through the organisation’s people management strategy. For example, exiting a poor performing employee may make commercial sense and be legally permitted, but consideration should also be given to how the employee will react to the dismissal and how their colleagues will perceive that decision.

Organisational Conflict

In some circumstances, the behaviours of one disgruntled employee can be understood as a manifestation of broader organisational conflict. Behaviours such as absenteeism, low morale, inefficiency, and sabotage may all be expressions of organisational conflict that need to be addressed on an on-going basis and not simply at the point where termination is being contemplated. However, where a decision is ultimately made to exit a particular employee, the employer should reflect on the circumstances that led to the employee’s exit and whether an audit of organisational policies and practices is warranted.

PCS can work with you and your leadership team to conduct a culture and effectiveness audit to identify gaps in your organisation and build a robust people strategy.

When is employment correctly characterised as casual?

Meriska Lourens, Associate

The approach to characterising casual employment was the subject of a recent determination of the Federal Court of Australia. This decision necessitates that organisations review their engagement practices around casual employment.

The Facts

The employee was a fly-in-fly-out truck driver and argued that he was a permanent full-time employee because his employment was continuous, predictable and determined in advance. On this basis he claimed to be entitled to payment for accrued annual leave when his employment was terminated.

The employer contended that:

  • it engaged the employee as a casual under its Agreement (making him ineligible for annual leave and other entitlements);
  • the employee was engaged by the hour and could choose when and where to work;
  • the Agreement described the employee as a casual; and
  • both it and the employee regarded his employment to be of a casual nature.

The Decision

The Court was asked to consider whether Parliament intended the words “casual employee” in the legislative provision granting the entitlement to annual leave to be used in their ordinary sense, their legal sense or a specialised non-legal sense.

Ultimately the Court found in favour of the employee and settled on a characterisation of “casualness” as involving an “absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work“.

The rationale for this is that employees who don’t have this firm advanced commitment will have the capacity to enjoy breaks from work when they choose, and therefore do not need to be guaranteed annual leave.

What a “no firm advance commitment” looks like

The Court outlined a range of indicia relevant to a characterisation of casualness, including:

  • irregular work patterns;
  • uncertainty;
  • unpredictability;
  • intermittency of work; and
  • unpredictability

Taking Stock

The decision has led employer groups to call for changes to prevent casual workers “double dipping” by claiming annual leave on top of a casual loading, and for a clear definition of “casual employees” in the legislation.

Unions have responded to the decision stating that there could be a sizable proportion of employees who have been incorrectly characterised as being engaged casually, and that those that have been in regular and predictable work patterns may be entitled to paid annual leave.

PCS recommends reviewing how your organisation engages with its casual workforce. It is risky for organisations to rely simply on the fact that an employee has been engaged on an hourly basis or that the applicable award or agreement provides for a definition of casual employment where this does not match the actual form and manner in which casuals are in fact engaged.

What’s on your Mind?: Mental Health in the Workplace

Rocio Paradela, Graduate Associate and Daniel McNamara, Graduate Associate

Mental health issues can have a resounding impact on productivity, performance and culture within workplaces of all sizes and industries. Approximately 21% of Australian employees have taken time off in the past 12 months for mental health reasons and this has a significant impact not just for the employees, but their colleagues, managers and the rest of the workplace.The effect that mental health conditions, such as depression and anxiety, can have on Australian business is estimated as being approximately $11 billion per year1. This calculation is based on figures for absenteeism, presenteeism, reduced work performance, increased turnover rates and compensation claims.

Legal implications

From a legal standpoint, employers owe a number of obligations to employees regarding their psychological health at work.

Under work health and safety legislation employers must provide a safe and healthy workplace and take action to eliminate and minimise any potential risks to the health and safety of all employees and those present at the workplace. This is not confined to the physical environment but extends to psychological impacts as well.

In relation to mental illness, the obligations include:

  • identifying possible workplace practices, actions or incidents which may be causing, or contributing to poor outcomes for workers in terms of their mental health; and
  • taking actions to eliminate and minimise those risks.

Under state and federal anti-discrimination laws employers have an obligation to make reasonable adjustments for employees with disabilities to enable them to perform the inherent requirements of their job. Examples of such adjustments include offering flexible working options or changing aspects of the workplace arrangements or practices. However, an adjustment is not required if it would impose an “unjustifiable hardship” on the employer, or the employee would not be able to perform the inherent requirements of the job even with such adjustments.

The Fair Work Act 2009 (Cth) also provides protection for employees with mental health illness from adverse action taken by an employer because of their disability. Potential forms of adverse action include dismissal, refusing to employ a prospective employee or discriminating against an employee.

Responding at the workplace level

There is no “one size fits all” approach to implementing strategies that promote a mentally healthy workplace. Common organisational responses include:

  • Employee Assistance Programs;
  • flexible work arrangements;
  • policies which address mental health issues; and/or
  • mental health leave (via personal leave and/or the implementation of mental health days).

These types of strategies are designed to assist employees to manage their mental health issues and, more broadly, to enhance the prospect of a healthy workplace.

On a more individual level, a commitment by employers to properly address the mental health issues of their employees is fundamental, not only in employers meeting their legislative obligations, but also for all employees to flourish in their employment. Employers should ensure that the needs of employees who are experiencing mental health issues are understood, that the impact of workplace practices on these issues are monitored, and that employees receive the support they require. This may necessitate adjustments being agreed to between the employer and employee, and efforts made to keep under review workload distributions, hours and leave arrangements.

Key takeaways

We recommend that employers consider the following dos and don’ts in their approaches to mental health in the workplace:

Do:

  • Observe and monitor changes in employees’ behaviour
  • Foster help-seeking
  • Work constructively with employees who have mental health issues
  • Show empathy to employees requiring support
  • Create open channels of communication

Don’t:

  • Tolerate a poor workplace culture
  • Rely on performance management as a means of dealing with mental health issues
  • Make presumptions about the perceived capabilities or weaknesses of employees with mental health issues
  • Treat employees differently as a result of their mental health status

1.  Blackdog Institute and beyondblue (2016), “Developing a mentally healthy workplace: A review of the literature”, Report prepared for the National Mental Health Commission, Sydney.


Updates to Victorian long service leave and labour hire legislation

Daniel McNamara, Graduate Associate and Rocio Paradela, Graduate Associate

Businesses that operate in Victoria need to be mindful of recent legislative changes in this jurisdiction. Two areas subject to change in Victoria are changes to long service leave entitlements and the new labour hire licensing framework.

Long Service Leave

The Victorian Parliament has passed new long service leave legislation, replacing the existing Long Service Leave Act 1992 (Vic) (the “LSL Act“). The provisions are likely to become operational later this year.

What are some of the major changes?

  • Employees will be entitled to take long service leave after completing seven years’ continuous employment instead of 10 years.
  • Both paid and unpaid parental leave will count as service (other than in the case of a casual or seasonal worker).
  • An employee can request to take long service leave for a minimum period of one day, although an employer may refuse such a request if the employer has reasonable business grounds to do so.
  • Continuity of service will not be broken where a casual or seasonal employee:
    • takes up to two years’ parental leave (whether paid or unpaid);
    • obtains the employer’s agreement in advance to an absence;
    • has a break which is impacted by seasonal factors; or
    • has been engaged on a regular and systematic basis and has a reasonable expectation of being re-engaged.

In addition, if an employee’s working hours have changed during the two years immediately before taking long service leave, the employee’s normal weekly number of hours is the greater of: the average weekly hours worked over the past 52 weeks (one year), 260 weeks (five years) or the last period of continuous employment.

Criminal liability has been established with respect to breaches of a number of obligations under the LSL Act. This includes where an employer takes adverse action against an employee because the employee is entitled to long service leave or other entitlements under the LSL Act.

The LSL Act also provides for accessorial liability of certain officeholders of a corporation where they are shown to have been knowingly involved in the commission of an offence by the corporate entity.

Labour Hire Licensing

Victoria is continuing the trend of other states, such as South Australia and Queensland, with the Labour Hire Licensing Act 2018 (Vic) (the “Licensing Act”) receiving Royal Assent on 26 June 2018.

What are some of the major changes?

Similar to labour hire licensing legislation in other Australian states, the core features of the Licensing Act include:

  • the mandatory licensing of labour hire organisations operating within Victoria;
  • the requirement of labour hire licensing organisations to meet a “fit and proper person” test to ensure that minimum standards are met;
  • penalties imposed on non-compliant labour hire organisations and on individuals/organisations engaging with non-compliant labour hire organisations; and
  • the establishment of a Labour Hire Licensing Authority (based in Bendigo) and the Office of the Labour Hire Licensing Commissioner.

A Federal labour hire system?

The Federal Labor party has promised, as an election pledge, to introduce a uniform federal scheme that would guarantee the same pay and conditions for labour hire workers as award-covered employees throughout Australia. In addition, under this model, labour hire organisations would need to demonstrate compliance with relevant workplace legislation (including the Fair Work Act 2009 (Cth) and tax, superannuation, WHS and immigration laws) in order to maintain a license.

If you require any advice as to how these legislative changes may affect you or your organisation, please feel free contact People + Culture Strategies on (02) 8094 3100.

Minimum wage up by 3.5% from 1 July 2018

On 1 June 2018, the Fair Work Commission (the “FWC”) handed down the decision in its annual wage review.

From the full pay period on or after 1 July 2018, the national minimum wage will be $719.20 per week (or $18.93 per hour). This represents an increase of $24.30 per week.

Following the decision, minimum wage rates in modern awards will be increased by 3.5% and a new national minimum wage order will be made with respect to award free employees.

What does this mean for employers?

  • Subject to the requirements of relevant modern awards, enterprise agreements and employment contracts, from 1 July 2018, employers must ensure that their full-time employees are paid at least $719.20 per week (or $18.93 per hour).
  • Employers must be aware of the award or agreement (if any) that applies to their employees and ensure wages are paid pursuant to it, noting that minimum wage rates in modern awards will be increased by 3.5%.
  • An employer who fails to pay wages in accordance with the national minimum wage order or requirements of a relevant award or agreement will be exposed to liability for breach of the Fair Work Act 2009 (Cth).

 

 

FWC decides on Family or Domestic Violence

 

Rohan Burn, Graduate Associate

The Fair Work Commission decision in March 2018 recognised that family and domestic violence “is an issue that impacts on workplaces and…requires specific action.”

As part of the four yearly review of modern awards, in July 2017 the Full Bench of the Fair Work Commission (“FWC”) formed the preliminary view that it was necessary to make provision for family and domestic violence leave, but that they were not satisfied that it was to include in all modern awards an entitlement to 10 days’ paid leave. However, the FWC did express the preliminary views that all employees experiencing family or domestic violence should have access to unpaid leave and that employees should be able to access personal/carer’s leave for the purpose of taking family and domestic leave.

Parties were then provided with the opportunity to make submissions before the decision was finalised. In March 2018 the Full Bench reconvened, and decided to provide five days unpaid leave per annum to all employees (including casuals). However, it deferred consideration of whether employees should be able to access personal/carer’s leave for the purpose of taking family and domestic violence leave.

While the exact wording of the new model term has not been finalised, the March 2018 Full Bench decision gives a good indication of the scope of the obligations.

Proposed model term

As it is currently framed, the model term will allow an employee experiencing family or domestic violence to take five days’ unpaid leave per annum if:

  • the employee needs to take some action to deal with the impact of family or domestic violence; and
  • it is impractical for the employee to do that outside their ordinary hours of work.

The leave will be available for full-time, part-time, and casual employees. Eligible employees will be entitled to the full five days’ leave from the start of each year, but the leave will not accumulate.

In applying for the new entitlement:

  • an employee will need to give notice to their employer as soon as practicable (which may be a time after the leave has started) advising the employer of the expected period of the leave;
  • an employee, if required by the employer, will need to provide evidence that would satisfy a reasonable person that the leave is taken for the specified purpose; and
  • employers will need to take steps to ensure that the employee’s information is treated confidentially (as far as it is reasonably practicable to do so).

How this entitlement will fit in with other rights and obligations

Once the drafting of the model term has been finalised, employers will need to amend their policies accordingly. Many employers may have been dealing with this type of leave entitlement already, as it has been incorporated in a range of enterprise agreements for some time, and often on more generous terms, including paid leave entitlements. There is also an existing obligation under the Fair Work Act 2009 (Cth) to consider requests for flexible work arrangements for those experiencing family or domestic violence, and those supporting someone in this situation.

Key takeaways

  • Once the term has been finalised, employers will need to review their existing policies to ensure it meets the new minimum set by the model award term.
  •  The inclusion of casuals within the scope of this new entitlement needs to be taken into account.
  • Whether employees dealing with family or domestic violence can avail themselves of forms of paid leave, such as personal or carer’s leave, remains to be determined.

 

When is the ordinary turnover of labour an exception to the obligation to pay redundancy entitlements?

Daniel McNamara, Graduate Associate

In the recent case of United Voice v Berkeley Challenge Pty Ltd,1 the Federal Court found that a contracting business was not exempt from the redundancy pay obligations under the National Employment Standards (“NES”) in the Fair Work Act 2009 (Cth) (“FW Act”).

Background

  • The NES provides redundancy pay entitlements, but these are stated not to apply in circumstances where the employee’s employment is terminated due to the “ordinary and customary turnover of labour”.
  • In this case, the employer, Berkeley Challenge Pty Ltd (“Berkeley”), a part of the Spotless Group, conducted a contracting business that provided various services to its client, including cleaning and security services.
  • In 2014, Berkeley lost a contract that it had held for over 20 years with a Queensland shopping centre, and as a consequence decided to terminate the employment of 21 employees.
  • When the company declined to provide the affected employees with redundancy pay on the basis that the terminations were due to the “ordinary and customary turnover of labour”, the union representing the affected employees (United Voice) brought an action against Berkeley in the Federal Court seeking payment of the redundancy entitlements, among other things.

The Decision

During the proceedings, Berkeley claimed that it was an “ordinary and customary” practice within the Spotless Group to terminate the employment of employees in circumstances where the employing entity had lost a major contract.

The Federal Court rejected this argument on the basis that:

  • the exception only applies in circumstances where termination of employment is “both common, or usual, and a matter of long-continued practice”;2
  • in determining whether the exception applies, a Court will have regard to the established practices of the employer in question, which in this case was Berkeley, rather than the practices within the broader Spotless Group;
  • while it may have been customary for other entities in the Spotless Group to dismiss employees in circumstances where the employer lost a services contract, this was not the case for Berkeley; and
  • the terminations and redundancies were “uncommon and extraordinary” for Berkeley and not a matter of long-standing practice.

In coming to this conclusion, the Court considered the long-term employment of the affected employees, some of whom had worked for Berkeley for 21 years, and the 20 years that Berkeley had held this specific contract. As a result, the Court ordered that Berkeley provide the affected employees with redundancy pay in accordance with the NES.

Key takeaways 

  • The “ordinary and customary turnover of labour” does not operate as a blanket exception where on-going employment is dependent on the renewal of contracting arrangements.
  • The primary consideration is what has been the practices of the employer in question, rather than what has occurred within a broader group of related companies.
  • If an employer regards a redundancy situation as potentially coming within the “ordinary and customary turnover of labour”, legal advice should be sought to confirm that the established practices correspond to the requirements of the exception.

Superannuation amendments, creating super powers

Rohan Burn, Graduate Associate

The Federal Government has released an exposure draft of a new Bill on taxation and superannuation guarantee integrity measures. The Bill requires all employers to implement Single Touch Payroll (“STP”) reporting, grants the Australian Taxation Office (“ATO”) stronger enforcement powers, and sets out when new offences may have been committed.

STP reporting

Currently the STP reporting framework comes into effect from 1 July 2018 for entities with 20 or more employees. The STP is intended to facilitate the ATO in detecting, monitoring, and preventing the non-payment of superannuation. The technology enables and requires employers to provide the ATO with real-time reporting of superannuation and payroll information, such as withholding payments, employee wages, and superannuation contributions.

The Bill introduces additional reporting requirements, and will extend the STP rules to all employers from 1 July 2019. This will provide the ATO with greater visibility and address the “significant proportion” of superannuation guarantee non-compliance attributable to small businesses. This was one of the recommendations of industry and government reports in 2016 and 2017. The reports called for additional resources and powers for the ATO to ensure employer compliance with superannuation guarantee obligations and to recover unpaid entitlements.

New enforcement and compliance measures

The Bill gives the Commissioner of Taxation the ability to direct an employer to:

  • pay unpaid and overdue superannuation guarantee charge liabilities;
  • undertake educational courses relating to superannuation guarantee obligations; and
  • provide a court ordered security deposit for the payment of existing or future tax related liability.

The Bill also allows the Commissioner to disclose a current or former employer’s suspected non-compliance to an affected party.

Offences

With some exceptions, the Bill creates offences for the failure to comply with the directions set out above.

Notably, an employer is not exempt from administrative penalties and/or criminal liability even if it took all reasonable steps to comply with the direction to pay, if the employer cannot establish that all reasonable steps were also taken to discharge the liability before the direction was made.

Before issuing a direction to pay, the Commissioner of Taxation must consider the employer’s history of compliance with taxation laws, the steps the employer has taken to discharge or dispute the unpaid liability, and whether the amount is substantial, having regard to the size and nature of the business.

Key takeaways if the Bill is enacted

  • An employer may commit an offence if they fail to comply with the new powers of the ATO to give directions.
  • Employers may need to change their payroll software and/or management to report through STP.
  • Smaller employers should do a headcount on 1 April 2018. If they have fewer than 20 employees the STP rules will not apply until 1 July 2019. 
  • Submissions can be made on the Bill from 24 January 2018 until 16 February 2018.