3.4.5.2 Ceased employers
A ceased employer is an employer who has:
- ceased operating as a business and
- no longer employs workers.
Workers employed by ceased employers must become direct payees of the Agent.
Employees of ceased employers do not become direct payees when:
- mergers, take-overs or amalgamations of public instrumentalities occur, for example, local government council or hospital amalgamations or restructures
- the employer continues to operate under a new legal name but not as a new legal entity.
These employers are treated as compliant active employers or non-compliant active employers.
See Compliant active employers below.
3.4.5.3 Compliant active employers
A compliant active employer is an employer who is currently operating as a business entity and is making weekly payments to their worker.
Exceptional circumstances where a worker can be made a direct payee
Examples of exceptional circumstances may include:
- employer is insolvent
- employer has clearly demonstrated financial difficulties/hardship. Particularly consider small employers who have advised Agent of cash flow issues
- the Magistrates’ or County Court has made a decision or a determination that payments be made directly
- the employer has had a receiver and manager or liquidator appointed
- worker has NCWC No Current Work Capacity, in relation to a worker, means a present inability arising from an injury such that the worker is not able to return to work, either in the worker's pre-injury employment or in suitable employment indefinitely - ceases to live in Australia and has ongoing entitlement to weekly payments
- it is clearly impractical for the employer to make weekly payments, for example, a small business farmer who has employed someone for a short period of time such as a shearer and the person has moved on or cases of similarly extreme nature
- there is animosity between the worker and the employer and it is clearly in the worker's best interests to do so
- a complaint has been made regarding non-compliant employer which has been rectified but a further complaint has been received
- worker has obtained employment with another employer
- the worker has an ongoing entitlement to compensation after 130 weeks of incapacity and is classified as indefinitely having NCWC, an employer may submit a request for a worker to become a direct payee. The employer must seek the worker's agreement to become a direct payee prior to submitting the request to the Agent.
In all of the above circumstances, further investigation is required before a decision to pay direct.
Not exceptional circumstances
The following or similar, are not exceptional circumstances:
- the worker has left their injury employer, either by resigning or being made redundant
- the purpose is or appears to be, to minimise an employer’s administrative costs and overheads
- the worker and/or the employer believe it is inconvenient for the worker to remain on the employer’s payroll .
3.4.5.4 Refer non-compliant employers to WorkSafe
Where an active employer has been non-compliant with their obligations to a worker, having prioritised the worker to be paid as a direct payee, the Agent should consider referring the matter to WorkSafe.
Referring to the RTW Inspectorate
Agents should consider referring the matter to RTW Return to Work Inspectorate, where an active employer has been non-compliant with their obligation to offer suitable duties If during the period in which an employer has an obligation to provide employment to an injured worker, the worker has a demonstrated current work capacity, the employer is required to provide the worker suitable employment (suitable duties). Refer to definition of suitable employment also. where the claim is under 52 weeks of paid weekly compensation and the injured worker remains job attached (see 5.3.4 Refer claim to RTW inspectorate).
While awaiting a response from the RTW Inspectorate, Agents should, if necessary, contact the employer and advise of the RTWI referral, and seek DP documentation from the injured worker. The Agent can also assess whether it is appropriate to make a worker an interim direct payee while awaiting RTWI review (see 3.4.5.1 Determine a direct payee).
Upon receipt of a referral from the Agent, the RTW Inspectorate will:
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review the employer’s obligations to provide employment, plan return to work, or consult about a worker’s return to work, when a worker is job attached
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remind the employer of their obligations with regards to payments in line with the Agent’s previously provided advice
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advise the Agent of the outcome of their intervention, in particular whether the employer was considered compliant with providing employment and completing RTW planning. The RTW Inspectorate will also provide feedback on the discussions that occurred regarding payments and whether the employer indicated if they would resume paying the worker.
Note: it is not the role of the RTW Inspectorate to make a decision or provide approval for a decision regarding direct payees, this remains the role of the Agent.
Referring to the Investigation Compensation Group
Agents should consider referring the matter to WorkSafe's Investigation Compensation Group where an active employer has been non-compliant with their obligation to pay weekly payments to a worker, and must:
- ensure full details of the non-compliance and copies of relevant documents accompany the referral, including:
- documented conversations between the Agent, the employer and the worker
- relevant correspondence received from the employer and/or worker
- further information documenting:
- number of payments unpaid, relevant dates and amounts
- relevant Certificates of Capacity
- explanation from employer perspective, including who has been contacted in relation to this matter
- impact on the worker (ie financial impact on them/their dependents)
- have received written consent from the worker to refer the matter to the Investigation Compensation Group
- request that WorkSafe advise the Agent of the outcome of their review.
Note: the Investigation Compensation Group can't investigate a matter without written consent by the worker.
Before referral to the Investigation Compensation Group
Before any matter being referred to the Investigation Compensation Group, the Agent must ensure that the employer:
- has valid Certificates of Capacity for the period of non-payment
- received the letter of acceptance of liability for weekly payments and
- was aware of their obligations to make weekly payments and the implications of failing to comply
- has been advised that the matter will be referred to WorkSafes Investigation Compensation Group for investigation.
Note: If the Agent has identified grounds for the non-compliant employer to be referred to the Investigation Compensation Group, then this is sufficient justification for the worker to be made a direct payee. Restoring the worker's entitlements is separate to the enforcement process and must be managed by the Agent prior to the referral.
3.4.5.5 Taxation of direct payees
When a worker becomes a direct payee, the Agent assumes the role of the employer and deducts tax for the Australian Taxation Office (ATO Australian Tax Office).
ATO requirements
It is essential to handle tax instalment deductions in accordance with the requirements of the ATO. These requirements are set out in PAYG instalment essentials, which can be obtained from the ATO.
The ATO provides the following tax tables to calculate the amount of PAYG withholding on regular payments:
Requirement exceptions
If exceptional circumstances require a departure from the ATO requirements, Agents must provide full details to WorkSafe’s Finance Division immediately.
Taxation of direct payees with HECS/HELP debt
Agents must withhold additional tax where a direct payee has indicated that they have any of the following debts on their TFN Declaration or Withholding Declaration:
- Higher Education Loan Program (HELP) including HECS-HELP and FEE-HELP; VET Student Loan (VSL), Financial Supplement (FS), Student Start-up Loan (SSL) or Trade Support Loan (TSL) debt
The HECS/HELP flag should be set to Y in CM10 when a DP has indicated that they have any of these debts, which will result in a warning message being displayed in ACCtion when Agents attempt to process weekly compensation. Agents are then required to manually override the system calculated tax amount to include the extra tax resulting from the HECS/HELP/other study assistance debt, and continue to do so until the worker provides an updated TFN Declaration or Withholding Declaration indicating that they no longer have a this debt.
As not all Agents have access to the enquiry screen ECM08 it is recommended that CL09 is still updated using the HECS code to indicate when a worker has a study assistance debt, and when the study assistance debt no longer exists.
Taxation of payments for previous years
If a worker is paid arrears of weekly payments of compensation, for periods in previous financial years, including a lump sum payment in arrears, calculate the prescribed rate of PAYG deductions using the ATO's withholding Schedule (worked examples from the ATO website are available here). The tax table applies to back payments, as well as commissions, bonuses and similar payments.
Where the worker has not provided a TFN declaration, the relevant PAYG withholding is required to be deducted in accordance with the ATO.
When the worker submits their annual tax return, the ATO will determine the correct rate to actually tax the worker.
Privacy and confidentiality
Taxation legislation has specific provisions about confidentiality and privacy. Penalties apply if breaches of these provisions occur.
Tax file number information must not be filed on the claim file. These records must be filed in line with each Agent’s process to store tax file number information.
PAYG payment summary
A PAYG payment summary details for the financial year the amount of:
- weekly payments paid and
- tax deductions made.
PAYG payment summaries to direct payees
WorkSafe on behalf of Agents issue PAYG payment summaries to direct payees. They are sent to the direct payee at the postal address Agents have recorded in ACCtion at the end of the financial year.
PAYG payment summaries include the worker’s Tax File Number. Copies must not be filed on the claim file. These records must be filed in line with each Agent’s process to store Tax File Number and taxation information.
Payments shown for financial year
Payments will be shown on the PAYG payment Summary for the financial year in which the payment is made irrespective of the period for which the payment is made.
Prior financial years
When a worker receives payment for a prior financial year, they may have rights for concessional tax treatment but the payment will be shown in the current year’s PAYG payment summary.
PAYG calculations for payments referable to a prior financial year can be worked out using the ATO's tax table for back payments, commissions, bonuses and similar payments.
Worked examples from the ATO website are available at: ato.gov.au/Rates/PAYG-withholding-2017-18/Schedule-5---Tax-table-for-back-payments,-commissions,-bonuses-and-similar-payments/?page=8
Specifically method B(ii) applies to backpayments that relate to a previous financial year. The PAYG should be withheld at the current year’s rate (i.e. rate at the time the payment is being made).
Tax on interest payments to direct payees
See 3.4.3.1 Interest payments to a worker
Cancel & reissue a cheque
If an Agent needs to cancel and reissue a cheque for payment including tax deductions, it is essential that both the cancellation and the reissue take place in the same financial year.
If a payment included in a previous financial year is cancelled, Agents must advise WorkSafe’s Finance Division immediately, in writing, including full details.
Recovery of weekly payments
There are two types of recovery of weekly payments that involve tax deductions that Agents can seek from a direct payee:
- recovery within the same financial year as the original payment
- recovery after the year the original payment was made.
See: Recoveries