Casual employee granted leave entitlements

The recent judgement by the full Federal Court in the case of WorkPac Pty Limited V Skene has opened the way for staff employed on a casual basis to potentially access leave and other entitlements, which are normally the domain of permanent staff.
The case, which was handed down in August this year, concerned a Queensland mine worker who was employed through a labour-hire firm on shifts similar to full-time mine workers, but at the casual rate of pay. When his employment was terminated, Mr Skene put his hand up for leave entitlements and requested that penalties be imposed on WorkPac, which after some legal jousting, the Full Federal Court granted.
The case has shocked the employment world, with casual workers now contemplating back-claims for leave entitlements, and employers seeking solutions to avoid this apparent double-dipping by what some have called a new class of “super employee”.
Employer bodies have made representations to government, urging for the law to be tightened to clearly define the term “casual” employee, and create certainty, so that that employees remunerated at casual rates cannot also claim leave entitlements, for which it is considered that they have already essentially been compensated by means of a premium hourly rate.
We will have to watch developments in this area. Clients may wish to discuss this with their employment law advisors, as it is not something that we specialise in at RDL. I found this article on the case to be very informative.

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ACNC Legislation Review Report released

In June this year, the Panel charged with reviewing the ACNC Act presented its report to the Government.  After much anticipation, this report has now been tabled in Parliament.  It makes thirty recommendations, including the following:

  • Basing financial reporting thresholds on a rolling three-year average of revenue, increasing the thresholds to a minimum of $1 million revenue for medium entities, and $5 million revenue for large entities from 1 July 2019.
  • Requiring related party transactions to be disclosed by all charities.
  • Requiring large charities to disclose remuneration paid to senior executives and responsible persons.
  • Removing the Governance requirement to comply with Australian laws.
  • Developing a mandatory Code of Conduct for fundraising and amending the Australian Consumer Law to clarify its application to the charity sector.
  • Amending the ACNC Act to require self-assessing income tax exempt Not-for-profits (such as sporting clubs) to be registered with the ACNC when their annual revenue exceeds $5 million, as a condition to gaining access to tax concessions.

During the consultation period, there were many calls for the current financial and governance exemptions for Basic Religious Charities to be removed.  This creates complexities because it potentially interferes with provisions in the Constitution addressing religious freedom.  As a result, the report recommends that the financial reporting exemption be reviewed only if the changes to reporting thresholds are made, and reviewing the governance exemption only if the following recommendations are also adopted:

  • The ACNC’s power to replace a responsible person is removed.
  • A registered entity be presumed to comply with the ACNC governance standards if it already complies with other comparable governance requirements.

The Government has not yet indicated how it will respond to the recommendations.

The full report is available here.

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ATO to target Air BNB and similar online rentals

The Australian Taxation Office (ATO) has recently signaled that it is going to conduct a data-matching program to identify taxpayers receiving income from short term rentals. Information from online platform sharing sites for around 190,000 Australians will be examined to identify taxpayers who have left out rental income and over-claimed deductions.
Assistant Commissioner Kath Anderson said recently that “the availability of short stay rentals has exploded thanks to the online revolution. With the growing number of homes, apartments, units and rooms available via accommodation sharing sites, there is a real risk some people may not understand their tax obligations.”
The ATO’s sophisticated data-matching systems have seen it access details of operators in the ride-sharing industry, and it is now moving to target online rentals. With wide access powers, “there is no high-tech hideaway for rental income” according to Assistant Commissioner Anderson.
While the ATO will be sympathetic to innocent mistakes, blatant attempts to avoid paying tax on income will be met with stiff penalties. Any who may have overlooked declaring such income or over-claimed deductions are well advised to get their house in order before the ATO appears. Keeping comprehensive records is also important.

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New Standards released for Charities operating overseas

When the ACNC was introduced, the legislation provided for the introduction of External Conduct Standards applicable to charities with overseas interests. Now, nearly six years on, Treasury has released the detail on these standards. The standards are intended to provide a minimum level of assurance that registered charities meet appropriate standards of governance and behaviour when operating or funding activities outside Australia, including when acting through third parties.

The standards address:
• Maintaining internal controls on overseas activities and resources provided to fund them.
• Ensuring that overseas operations are compliant with certain Australian laws (such as laws addressing slavery, taxation, and money laundering)
• Keeping appropriate records to be able to report annually on a country by country basis
• Minimising the risk of fraud and corruption
• Protecting vulnerable individuals

Like the existing Governance standards, the standards are based around ‘reasonable’ steps and procedures, so what is ‘reasonable’ will vary according to an organisation’s size, scale of activities and the nature of operations.

As drafted, they apply to all registered charities (including Basic Religious Charities) except when activities outside Australia are “merely incidental” to the operation and pursuit of the entity’s purposes in Australia.

The consultation period is open until 21 September 2018. More details are available by following this link. The final legislation is expected to apply from 1 July 2019.

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Fringe benefits provided to religious practitioners

The ATO has issued a draft tax ruling TR 2018/D2 expressing the Commissioner’s preliminary view of exempt fringe benefits provided to religious practitioners.  It replaces TR 92/17 immediately, but may be revised when the ruling is finalised. The law it considers prescribes that a benefit

  • provided by a registered religious institution
  • to an employee religious practitioner, or their spouse or child
  • in respect of the practitioner’s pastoral duties or directly related religious activities

is exempt from fringe benefit tax.  The ruling considers each of these requirements in sequence.

Registered Religious Institution

When the ACNC was introduced, the Fringe Benefit Tax Assessment Act was amended so that only ‘registered religious institutions’ (registered charities with a sub-type of advancing religion) could provide exempt fringe benefits to religious practitioners.  This is one of the key changes reflected in the ruling.

A charity is able to have multiple charitable purposes.  Where one of those purposes is ‘advancing religion’ this condition is met.

Religious Practitioner

The old ruling indicated that a minister of religion would have “many” of the following characteristics:

  • Is a member of a religious institution
  • Is recognised by ordination or other admission or commissioning, or …has the authority to carry out the duties of a minister based on theological training or experience
  • Is officially recognised as having authority on doctrine or religious practice
  • Is distinct from ordinary adherents of the religion
  • Is an acknowledged leader in spiritual affairs or the institution, and
  • Is authorised to act as a minister or spiritual leader, including the conduct of religious worship and other religious ceremonies.

Now the Commissioner has tightened his interpretation and considers that “except in rare cases, a minister of religion would have all of these characteristics.”

The old ruling directly referred to lay persons acting in the capacity of a minister of religion.  This reference has been removed, but an example indicates that they are still likely to be considered religious practitioners.

Pastoral duties or other directly related religious activities

The Commissioner’s view of pastoral duties has been expanded and now includes providing pastoral supervision to those engaged in pastoral duties.  This may offer greater security when providing fringe benefits to pastoral team leaders or executive leaders in para-church organisations.

a copy of the ruling TR 2018/D2 is available at https://www.ato.gov.au/law/view/document?docid=DTR/TR2018D2/NAT/ATO/00001

We would be glad to discuss the potential impact of this ruling with you.

The ATO is inviting public comment on the ruling by 24th August 2018.  We would encourage you to let us know of any concerns you may have with the ruling, but more importantly to communicate such concerns to the ATO via the submission process.

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New Guidelines for employers providing utes, work vans, etc.

For a long time there has been a misconception that work vehicles such as utes and panel vans have a blanket FBT exemption, and the ATO has got this in its sights.

About a year ago, the ATO issued a draft Guideline on the private use that is acceptable for a work vehicle to remain FBT exempt. It required a fair bit of monitoring by the employer, but the more recent version (PCG 2018/3) which was released in July 2018 seems more workable.

The new Guideline, which applies from 1st April 2018, gives employers greater certainty that they are operating within the rules. This will apply if:
• The vehicle is provided for work use;
• The vehicle cost (incl GST) was below the luxury car tax threshold at the time it was bought;
• It is not provided as part of a salary sacrifice arrangement;
• You have a policy that limits private use of the vehicle;
• The employee uses the vehicle to travel between home and work, and any diversion from this is limited to 2 kilometres;
• Other private use of the vehicle is restricted to no more than 1,000 kilometres per year, with no trip being more than 200 kilometres.
• The employer receives confirmation from the employee on the last two points and is “satisfied on reasonable grounds” of the vehicle’s private use (i.e. don’t turn a blind eye to what really went on)

Talk to us about how we can help you implement some processes for your business. The Guideline is available here.

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ATO to target individual tax claims this tax season

With an additional $130.8m government funding injection, the ATO has signalled that this tax season it will target work related expense claims by individuals. Having recently conducted a pilot program where over 850 individual tax returns were audited, the ATO is convinced that when it comes to tax claims, taxpayers are overstepping the mark.

The main areas of concern are claims for home office, including claims for mobile phones and internet, as well as laundry and home to work travel, especially where relaxed recordkeeping rules apply (such claiming for a car based on kilometres travelled, or $150 for work clothing).

The ATO has signalled its intention to require taxpayers to prove that it is necessary for them to incur these expenses in order to earn income, even if there is no requirement to produce receipts. This may mean, for example, getting a letter from your employer to verify that you are required to use your car for work. Unlike other areas of the law, tax law puts the onus of proof on the taxpayer, not the ATO. In other words, you need to prove your case.

You’d think that the ATO would get more mileage from targeting the corporates instead of the little guy, but ATO sources suggest that at $8.7 billion, the gap in underpaid tax from individuals is more than three times the amount of tax foregone from large corporates. Over-claiming expenses is seen as a significant contributor to this problem.

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Super Guarantee Charge Amnesty Announced

The federal government’s recently announced 12 month Amnesty on underpaid super is welcomed news for employers, providing a one-off opportunity to self-correct past super guarantee (SG) non-compliance without penalty.

If the legislation is passed as announced, the Amnesty will be available from 24th May 2018 to 23rd May 2019. Employers who voluntarily disclose previously undeclared SG shortfalls during the Amnesty, and before the commencement of audit activity will:
• not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
• (perhaps more importantly) be able to claim a tax deduction for catch-up payments made in the 12-month Amnesty period.

Employers will be required to pay all employee entitlements, including the unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge (GIC).

The Amnesty is applies to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018. It will not apply to the period starting on 1 April 2018 or subsequent periods.

It represents a good opportunity for employers to get their super obligations in order. The government has signaled that there will be higher penalties for correcting past sins once the Amnesty is over.

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Victorian Long Service Leave changes soon to begin

In May this year, the Long Service Leave Act 2018 (Vic) received Royal Assent, signalling some significant changes to the Long Service Leave entitlements of Victorian employees, and impacting all Victorian employers

The changes, which will take effect from 1st November 2018, will affect the entitlements of Victorian employees, unless they are specifically exempted.

Some of the more significant changes are as follows:
• Entitlement to take Long Service Leave to arise after 7 years (currently 10 years);
• Greater flexibility for employees in taking long service leave (will be able to take as little as a day at a time);
• Unpaid parental leave up to 52 weeks will count as part of the employee’s service period (it currently does not count)
• More generous provisions for employees who have transitioned to working a different number of hours (eg from full-time to part-time)
• Failure to comply with the Act will attract criminal penalties (previously attracted civil penalties)

Victorian employers are advised to familiarise themselves with the new rules.

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Proposed tax shock for those engaging contractors or employees

The May 2018 Federal Budget has left little doubt that anyone looking for a tax deduction for payments to contractors or employees had better get their house in order.

Currently payers are required to withhold the required amount of tax from payments to employees, and either obtain an ABN from a contractor, or withhold tax if no ABN is provided. Where such withholding does not occur, the payer is required to pay the tax, although in practice this is generally only enforced in the case of a tax audit.

From 1st July 2019 the government will amend the tax law to deny a tax deduction where a withholding obligation exists but no tax was withheld. The announcement, which was a recommendation contained in the final report of the Black Economy Taskforce, significantly changes the playing field, creating a financial disincentive for businesses to engage in Black Economy behaviour.

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