Marise Payne (NSW, Liberal Party, Minister for Human Services) Share this | Link to this | Hansard source

I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

THE SAFETY, REHABILITATION AND COMPENSATION AMENDMENT (IMPROVING THE COMCARE SCHEME) BILL 2015

The Government is committed to ensuring that Australian workplaces are safe, flexible and productive and to reducing the risk and impact of workplace injury and disease.

It is vital that people injured in the course of their employment are given every opportunity to get better and return to work.

This requires a modern workers' compensation scheme that meets the needs of today's workforce and is sustainable into the future.

Early and effective rehabilitation, as well as appropriate financial compensation, are essential to helping people recover and get back to doing the things that are important to them, including their jobs.

The Safety, Rehabilitation and Compensation Act 1988also known as the SRC Act—covers Australian and ACT Government employees and the employees of 33 corporations licensed under the Comcare scheme.

In 2012, the now Leader of the Opposition, as Workplace Relations Minister commissioned the first comprehensive review of the scheme since its introduction in 1988. When the then Hawke Government Minister, Brian Howe, introduced the SRC Bill into Parliament, he stated that the aim of the changes was to provide assistance to those employees most in need—the long-term incapacitated.

Unfortunately, since 1988 the scheme has had piecemeal amendments that have made it out-of-step with community standards and evidence-based practices.

The 2012 review commissioned by the Gillard Government found that the scheme does not give injured employees enough support and incentive to return to the workplace. In addition, the scheme allows injured employees to make claims for conditions that are unrelated to work and to undertake treatments that are not evidence-based. People are not getting back to work as quickly as they should and this is causing costs to spiral and creating negative perceptions of the scheme within the community.

Indeed, even the left-wing ACT Green-Labor Government have criticised the Comcare scheme, saying:

" The Comcare system is quite burdensome, not only for claimants but for their employers as well. The focus we want to see is recovery and rehabilitation for our staff and getting them back to the workplace. The studies show that if you get people back to work earlier, their lives are better in the long run. " 1

Using the recommendations from the review as a starting point, building on feedback from stakeholders and also adopting some reforms that have been advanced by state Labor Governments, this Government is proposing a package of reforms that will rehabilitate people and get them back to work; target support; and improve the scheme's integrity and viability. The reforms will also ensure that loopholes in the legislation that allow people to take advantage of the scheme are closed.

Importantly, and unlike most of the state and territory schemes, the proposed measures will ensure that the Comcare scheme continues to provide eligible injured employees with income payments until pension age and lifetime medical and rehabilitation expenses.

Ensuring a stronger focus on rehabilitation and return-to-work

The Bill includes a number of changes to assist employers to meet their rehabilitation obligations and engage more effectively with injured employees in the return-to-work process.

The amendments facilitate this cooperation by better enabling employees and employers work together and are prepared to accept responsibility for managing injuries, ensuring support where injuries occur and enabling people to get back to work as soon as possible.

Employers will have a stronger responsibility and greater incentives to provide alternate work or reduced hours to injured employees.

Injured employees will be encouraged to participate actively in their injury management and rehabilitation. Where they are able to do so, they will be required to seek, engage and remain in suitable employment.

The Bill also strengthens an employee's access to rehabilitation and, in specific circumstances, Comcare will have the power to commence or take over rehabilitation.

A large body of evidence-based research has established that many health problems can benefit from work-based rehabilitation and an earlier return to work. Using this evidence as a basis for improvement, the compensation payment system has been re-structured to provide targeted financial incentives to return to some form of work as soon as safely possible.

Systemic incentives to remain on workers' compensation for extended periods will be removed by providing for more graduated reductions in income replacement payments and reducing compensation payable where an injured employee refuses employment while having a capacity to earn in suitable employment.

Targeted support for injured employees

Many employees, when they are injured, need to take time off work to recover and will often draw on their own savings or leave entitlements while their workers' compensation claim is being considered. If claims are not processed quickly, leave entitlements and savings can be quickly exhausted, access to medical treatment can be delayed and this, in turn, can impede recovery and eventual return-to-work.

To reduce the financial stress of illness and injury, the scheme will now provide for provisional medical payments up to $5000 before a claim is determined. The employer will have immediate rehabilitation responsibilities.

The amendments will also ensure that the money spent on medical treatment and post-injury care and support services is better targeted and that services are provided by trained professionals.

Professional, monitored post-injury care will be provided to employees for the first three years of their injury, with uncapped, long-term or life-long care available to the catastrophically injured after this time.

Employees who have been seriously injured will still have access to lump sum payments to help them achieve a better quality of life. Under the proposed changes, the maximum lump sum payment amount will be increased from $242,000 to $350,000.

For those with less serious injuries, these payments will be more accurately scaled to allow for higher payments for those who need more support.

More timely access to compensation payments will be achieved with the introduction of timeframes for determining claims and resolving disputed claims, as well as improved information-gathering powers. Employers will also be required to lodge claims more quickly, and within specified timeframes, once they are notified of a claim.

To provide assistance to employers in meeting their obligations under the new timeframes, the amendments will enable more accurate calculation of income replacement. This will better take into account today's labour market conditions and the changing industrial profile of employers in the scheme.

To ensure that there are no gaps or inequities in the payment of entitlements to workers nearing pension age, eligibility for income replacement will be linked to the national age pension age and the five per cent reduction in compensation payments for employees accessing superannuation benefits will be removed.

Scheme integrity and viability

This Bill also seeks to ensure that the workers' compensation system deals with employment-related injury and disease.

When the Government of the day introduced the SRC Act 27 years ago, it recognised the need to ensure that employers were not paying for non-work related conditions and introduced changes that required employees to show a close connection between their condition and the employment in which they were engaged.

Despite this intention, this distinction has been blurred over time through judicial interpretation of the legislative provisions and unreasonable constraints have been placed on employers ' management of the workplace. This has resulted in increased premiums and pressures on scheme sustainability.

The amendments will distinguish more clearly between work and non-work related injuries and limit the payment of compensation to employees who have sustained injuries due to work or the workplace. Existing provisions will be strengthened to require a clear causal connection with work before compensation is payable.

The amendments will also clarify the matters to be taken into consideration for psychological claims and introduce new thresholds for specified pre-existing conditions such as heart, brain and spinal injuries to ensure that that scheme is accepting liability for conditions that are work-related.

As the workers' compensation system was never designed to prevent employers taking reasonable action to manage their employees, the proposed amendments will clarify the range of reasonable management actions that, when reasonably undertaken, should not give rise to compensation claims.

In order to address rapidly escalating scheme costs and ensure the long-term viability of the scheme, Comcare will be permitted to establish schedules that specify the amounts payable for medical treatment and medical reports, and legal services obtained by claimants. Currently, there are no limits on the amounts that Comcare pays for these items.

Schedules will not only reduce lengthy dispute timeframes but provide greater certainty and transparency for service providers and claimants.

Scheme costs will also be reduced by excluding overtime and allowances in the calculation of compensation payments after the first two years.

The integrity of the scheme will be underpinned by a 3-stage sanctions regime in which employees who don't meet their medical treatment and rehabilitation obligations will have their compensation rights suspended or cancelled.

Most people are willing and eager participants in the injury management and rehabilitation process and welcome every assistance to recover and resume their normal lives. Those who refuse to utilise the scheme ' s resources to get better and return to work will no longer be able to do so with impunity.

Australian Defence Force members

In recognition of the Government's commitment to the unique nature of military service, Australian Defence Force (ADF) members with coverage under Part XI of the SRC Act will be exempted from all but two of the proposals being introduced in the Bill.

These proposals relate to the calculation of permanent impairment compensation and will ensure that a member or former member of the ADF will not receive less compensation than an employee covered by the Comcare scheme with the same level of impairment. The Government's agreement to these changes is a reflection of our commitment to recognising the unique nature of ADF service.

The Government will also create a new Act to separate ADF members and former members from the existing SRC Act.

Conclusion

The Comcare scheme is one of the few remaining Australian workers' compensation schemes that provides, and will continue to provide, income payments until pension age and lifetime medical and rehabilitation payments. This Bill will ensure that we have a fair and sustainable long-tail scheme into the future—one of the only remaining in Australia.

A majority of these reforms have been inspired by the Review commissioned by the now Leader of the Opposition or from reforms made by State Labor Governments, including from the Bracks Government in Victoria.

These reforms ensure that the scheme will remain one of the most generous in Australia but the focus will shift towards getting people back to work rather than just providing compensation.

The Government's reforms will be better for workers by promoting injury prevention, but supporting those who are injured to recover and, most importantly, assisting them to get back to work.

I urge all members to support the changes in this Bill and commend the Bill to the House.

______________

1 ACT Minister Mick Gentleman, ACT dumps Comcare, Canberra Times, 26 February 2015

TAX AND SUPERANNUATION LAWS AMENDMENT (EMPLOYEE SHARE SCHEMES) BILL 2015

Today, I introduce a Bill that energises enterprise and makes life easier for the hard working women and men of small business.

This Bill introduces important improvements to the taxation of employee share schemes, removing key impediments introduced by the former Government and creating a new 'start up' incentive to restore and rebuild employee share schemes as a key tool to support enterprise formulation.

Employee share schemes support and encourage innovation. They energise enterprise and entrepreneurs.

An effective employee share scheme can support those hardworking women and men out there having a go.

Employee share schemes can drive growth in jobs and growth in productivity—important ingredients in a healthy economy.

Employee share schemes offer employees a financial interest in the company they work for—aligning the interests of employees with the interest of their employers. This synchronicity of interests and objectives can drive innovation, entrepreneurship and enterprise success.

Both shares and options provide employees with a direct interest in the performance of the firm. They can turn out to be very lucrative for employees of successful companies.

These schemes encourage positive working relationships and reduce staff turnover.

Employee share schemes benefit employers, too.

They are a very valuable tool for employers to attract and retain talented employees.

We know small firms sometimes lack the cash flow to pay salaries that can allow them to compete internationally. Employee share schemes allow firms to be globally competitive by supplementing employees' salaries with equity in the company they work for.

Unfortunately, the potential of employee share schemes has not yet been realised in Australia. This means we are missing opportunities every single day.

Our Government knows that our country's tax system should not be an impediment for innovative companies hoping to form, successfully start up and grow their business and in turn employ people and grow our economy.

In 2009, the Rudd Labor government introduced integrity measures and changed the tax treatment of employee share schemes. Labor's 2009 amendments mean that the discount component of shares or options is taxed when the employee receives those shares or options. This often forces employees to pay tax on their options before they can take any action to realise a financial benefit from those options.

We have seen the current tax arrangements effectively halt the provision of options through employee share schemes.

These taxation arrangements, introduced by Labor, are not competitive by international standards as they generally bring forward the taxing point well in advance of any prospect for a realisable gain.

The 2009 amendments also introduced integrity measures to limit opportunities for tax avoidance by requiring the reporting of schemes and participants. These sensible measurers will remain, while the Government deals with the harm caused by the ill-conceived tax treatment changes.

Because we are serious about getting this measure right, our Government has consulted extensively on this issue, and has listened to the concerns of a range of stakeholders. In the most recent round of consultations earlier this year, our Government hosted a number of face-to-face and teleconference meetings and received over 50 written submissions.

These revealed strong support for the Government's announced commitment to remedy a number of problems with the current taxation of employee share schemes. There were two significant areas of concern.

Firstly, the current rules mean employees often pay tax on their options before they can even get any financial benefit from the options by converting them into shares and selling the shares. This means employees have been taxed on something that is difficult to value and may not even result in a benefit to the employee.

The 2009 changes effectively ended the provision of options under employee share schemes, particularly by start-ups. This limited start-ups' capacity to remunerate employees. It put Australian firms at a disadvantage compared to those in many other countries.

In a world where employees can easily cross international borders, the 2009 changes affected the ability of Australian firms to compete globally for the best and brightest workers.

The second issue that many stakeholders were affected by was around the red tape and compliance costs currently associated with setting up and maintaining an employee share scheme in Australia.

Let me share one example with you today—companies offering an employee share scheme in Australia are required to have a company valuation completed.

Stakeholders revealed that this sort of valuation and preparation of required documents can cost up to $50,000 in Australia. This is compared with a cost of around $2,000 to $5,000 in the United States.

It is a pronounced problem for start-up firms, which are poorly placed to bear the impact of these regulatory costs.

This significant red tape problem must be addressed if we are to improve the competitiveness of Australia. This needs to be addressed if we want to make Australia the best place to start and grow a business—if we want to secure Australia's future as a destination for innovative start-up companies.

Our Government has listened to the concerns of stakeholders. We are committed to making it easier to do business in Australia. This Bill will address the problems arising since the 2009 amendments and will make Australia's taxation of employee share schemes more competitive internationally.

Today's Bill makes two main changes to the tax arrangements for employee share schemes.

First, employees issued with options under an employee share scheme will generally be able to defer tax until they exercise the options. This is rather than them having to pay tax when they receive the options.

This will benefit employees by deferring their tax liability until they can actually realise a financial benefit from their options.

Our Government will also extend the maximum time for tax deferral from seven years to 15 years, which will give companies more time to build their business and succeed.

The maximum individual ownership limit currently restricts employee ownership for those accessing the employee share scheme tax concessions. This Bill doubles this limit from five per cent to 10 per cent, which could help some founders and provide a boost for critical workplace team members.

These improvements will be available to all companies, from large biotech and mining companies listed on the stock exchange to small, unlisted businesses looking to take on their very first employee.

The amendments encourage more Australian companies to realise the potential of employee share schemes.

And those companies establishing such schemes will become more competitive in attracting talented employees in an international labour market. We are ensuring these businesses can be nimble in the global economy.

Secondly, we will provide an additional concession to start-up companies. This new incentive is unashamedly targeted at young enterprises to reactivate and energise employee share scheme arrangements for the productivity-enhancing, entrepreneurial and innovative start up sector.

Employees of eligible start-ups can receive options or shares at a small discount, and if they hold the shares or options for at least three years, they will not be subject to up-front taxation.

For options, the discount component will be taxed when the employee is in a better position to fund the tax liability. For shares, the discount component will be exempt from tax.

To qualify for this concession, companies must have been incorporated for less than ten years, be unlisted and have turnover of no more than $50 million per year.

These eligibility criteria mean that the concession is targeted towards small and start-up firms. The innovators we are committed to encouraging are those who often face additional liquidity and valuation obstacles that larger firms do not. The eligibility criteria will also limit the cost to revenue at a time of fiscal repair.

This concession will provide a significant benefit to many companies in the start-up phase. It will give them a better chance at achieving success in Australia, instead of being forced to look overseas for more favourable business conditions and a potentially more supportive entrepreneurial ecosystem.

These measures are about more than just providing a benefit to companies and employees engaged in employee share schemes. It adds to and supports our economy as a whole as we retain Australian talent and better support Australian innovation and entrepreneurship.

To address the excessive red tape burden, our Government has asked the Australian Taxation Office to work with industry to develop and approve 'safe harbour' valuation methods and standard documents. This will help streamline the process of establishing and maintaining an employee share scheme, reducing costs and compliance burdens that may discourage employee share scheme engagement.

A number of integrity measures designed to limit tax avoidance opportunities, such as reporting schemes and participants and limiting the $1,000 up-front tax concession to employees who earn less than $180,000 per year, will be retained.

All of these amendments will help align the interests of employers and their employees, as everyone involved in the business will have the financial and emotional motivation to grow their company.

The amendments will help stimulate the growth of high technology start-ups in Australia. The changes make Australia a more attractive destination for innovative companies seeking to commercialise their ideas domestically.

These changes boost the competitiveness of Australian firms who are committed to attracting and retaining talented employees in the international labour market.

Our Government has worked with industry to make sure that the draft legislation delivers the intended outcomes. We have listened to stakeholders and made amendments to the draft legislation.

In particular, we acted on stakeholder concerns regarding access to the capital gains tax concession, and eligibility for the start-up concession where certain venture capital funds are involved.

Stakeholders told us that most people convert their options into shares around the time they sell the shares. Under usual capital gains tax rules, this would mean that most employees of a start-up would not benefit from the 50 per cent capital gains tax discount because they haven't held the share for more than 12 months. This is despite a requirement to hold the option for at least three years in order to get the additional concession for start-ups.

Today's legislation addresses this issue and has been enhanced by collaborative and constructive consultation with stakeholders.

It makes it clear that the 50 per cent capital gains tax discount will be available for options issued to beneficiaries of the start-up concession, even where the underlying shares are held for less than 12 months. This will provide a significant concession to employees who are issued with options under the start-up concession. It is a further incentive for employers hoping to offer employee share schemes to their workers.

Our Government has also provided a carve-out for certain venture capital funds from the aggregated turnover and 10-year incorporation rules for the start-up concession. This will allow contributing Venture Capital Limited Partnerships, Early Stage Venture Capital Limited Partnerships and others to be excluded from the assessment of aggregate turnover and period of incorporation. This will expand the number of employees eligible for the start-up concession and, according to the Australian Private Equity and Venture Capital Association Limited, make sure the additional concession gets to 'the very kind of start-ups that Australia needs to nurture.'

As a result of our extensive consultations, we've also picked up many suggested technical amendments to make sure the legislation has the desired effect. Examples include allowing the Australian Taxation Office discretion in regard to the three-year holding rule; clarifying that the refund provision applies to cancellations; and clarifying that the definition of broad availability of the scheme applies only to shares.

We understand that some think the changes don't go far enough.

We have heard that having a taxing point when someone leaves their job isn't appropriate. The refund rules contained in this legislation should help to address some of this concern. The refund rules mean that income tax paid on options when employment ceases will be refundable if the option is subsequently not exercised and lapses, or is cancelled.

Even in the constrained fiscal environment we currently face, our Government knows the benefits that can be achieved by stimulating entrepreneurship and innovation in the economy.

These amendments will come at a cost to revenue of around $200 million over the forward estimates, but this cost will be far outweighed by the many benefits that the new arrangements will bring.

During consultations, some suggested that the start-up concession should be applicable for older, listed technology and mining start-ups. But all policy needs to be weighed against other priorities and the cost to taxpayers. So keeping this at the forefront of our mind, and on balance, we've decided to keep the additional concession focussed on genuinely early stage firms that are more likely to have cash flow issues.

Another strong message we heard in consultations was that stakeholders want this legislation to be in effect as soon as possible. In response, our Government intends to bring the amendments into effect for new shares and options issued from 1 July 2015.

These amendments go to our commitment to ensure Australia is the very best place to start and build a small business—we are committed to bolstering entrepreneurship and innovation in Australia. They provide a valuable tool that will benefit employers and employees—but importantly, they will ultimately benefit the health of our Australian economy.

These changes make Australia a more attractive destination for investment, particularly for innovative start-up firms.

They will increase the international competitiveness of Australian firms who we know need to compete with companies all over the world for talented employees.

Our Government is committed to ensuring the settings are right for Australian start-ups and small businesses to grow and prosper.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.