Dick Grozier | Senate, Education and Employment Legislation Committee (Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017 | 30 October 2017
Senate, Education and Employment Legislation Committee (Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017
Associate Director | Workplace Relations
Melbourne | 30 October 2017
The Australian Chamber of Commerce and Industry thanks the Committee for the opportunity to comment on the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017.
The Australian Chamber is not an organisation registered under the Fair Work (Registered Organisations) Act but many of the Australian Chamber’s members are registered organisations.
The Bill comprises five schedules. It is mainly intended to improve the transparency of operation of worker entitlement funds and improve their governance but it also makes a number of changes to the governance of organisations themselves.
Worker entitlement funds (WEFs) are not a new statutory concept. They are for example, although not identically defined, tax benefited. Contributions to “approved worker entitlement funds” are exempted from fringe benefits primarily to avoid double taxation of the same entitlement. Approved funds are either a statutory portable long service fund or a fund endorsed as an approved fund by the Commissioner of Taxation.
Approved funds cannot make loans to members, nor invest more than 5% of their assets in an entity controlled by a contributor or its associate. Their management must be at arm’s length from contributors. Endorsement allows funds to invest to earn from contributions, but the approval criteria only requires funds to pay benefits from the contributions made on the member’s behalf, not their earnings.
The Bill gives effect to 10 of the Royal Commission into Trade Union Governance and Corruption recommendations.
A Royal Commission is an administrative inquiry, not a judicial one. Nonetheless Royal Commissions have long been used to identify areas where there are problems or perhaps undesirable practices and recommend policy changes.
Turning to the Bill, we wish to focus on the first two schedules.
Schedule 1 of the Bill expands record keeping and expenditure policy obligations and also disclosable loans grants and donations to include inwards transactions and cumulative loans, grants and donations. These changes are generally supported.
However in the context of new obligations for written policies the Australian Chamber is conscious of the fact that organisations vary significantly in size and capacity. This is to some extent recognised in the Fair Work (Registered Organisations) Act, for example s 270 allows for reduced financial reporting for organisations with an annual income of less than $100,000.
The Chamber notes that there is a capacity for the Registered Organisations Commissioner to issue model policies, and welcomes this and any guidance that would assist less sophisticated organisations.
Schedule 2 is the major component of the Bill and the Australian Chamber believes that the Royal Commission recommendations supporting this schedule were carefully considered. It does however, have some concerns about two aspects of the schedule.
Proposed s 329JB prohibits contributions to unregistered WEFs and places an obligation on a contributing employer to ascertain whether the fund that contributions are to go into is registered at the time the contribution is made.
Contributions are underpinned by a deed between the fund and the employer but might also be underpinned by an enterprise agreement or a modern award obligation. Deregistration makes these terms impermissible or unlawful which makes them without effect, but they remain in the instrument.
Consideration could be given to requiring a WEF to advise a contributing employer of a change in its status and possibly also to return contributions which have been made within (say 14 days) of deregistration.
Whilst it may be said that the Bill’s deregistration process gives plenty of warning about the subsequent deregistration event, that is not true in all cases, such as a reinstatement of registration [s 329ND]. Reinstatement can be implemented retrospectively.
Related to this question is the fate of contributions which have been lawfully made into a fund which is subsequently deregistered. It is not clear that contributions have also been allocated to individual members in all WEFs, and in some arrangements either the employer makes up any shortfall between the fund payment and the employee entitlement or the employer is reimbursed for paying the employee directly.
The Registered Organisation Commissioner’s capacity to issue directions under the Bill appears confined to registered funds [s 329MA]. It is very clear that such a fund is not likely become insolvent without its contributions stream. The Bill makes it an offense to operate when unregistered [s 329JA]. This appears to mean that a deregistered fund cannot continue to pay benefits, and it is unclear that a fund’s existing wind-up rules, if in fact triggered by the deregistration, would deal equitably in this context with members and contributors.
Should the committee conclude that there is a legitimate concern in this issue it may wish to consider requirements on deregistered WEFs to transfer member contributions, properly assigned to individual members, to a member’s successor fund.
Schedule 3 - Deals with election payments
Schedule 4 - The Australian Chamber supports the schedule.
Schedule 5 - Is supported.
Finally, could I thank the committee for permitting us to phone in and also the secretariat for facilitating the arrangement.
 S 58PB, Fringe Benefits Tax Assessment Act 1986
 Currently a rules requirement to develop and implement policies about expenditure [s 141(1)(ca)]
 Removal from the register is conditioned by practicability.