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 .

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3.4.5.4 Refer non-compliant employers to WorkSafe

Where an active employer has been non-compliant with their obligation to pay weekly payments to a worker, having prioritised the worker to be paid as a direct payee, the Agent should consider:

  • referring the matter to WorkSafe’s Enforcement Group
  • ensuring that 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 written evidence, such as any correspondence from an accountant to explain circumstances (not necessary in all cases)
    • 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)
  • request the Enforcement Group to advise the Agent of the outcome of their review.
Before referral to the enforcement group

Before any matter being referred to the Enforcement 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 WorkSafe's Enforcement Group for investigation.

Note: If the Agent has identified grounds for the non-compliant employer to be referred to the Enforcement 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.

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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.

See ato.gov.au/Rates/Schedule-5---Tax-table-for-back-payments,-commissions,-bonuses-and-similar-payments/?page=1#UsingMethodB

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

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