Business Services Wage Assessment Tool Payment Scheme Amendment Rules (No. 2) 2016

EXPLANATORY STATEMENT

Issued by the authority of the Minister for Social Services

Business Services Wage Assessment Tool Payment Scheme Act 2015

Business Services Wage Assessment Tool Payment Scheme

Amendment Rules (No. 2) 2016

Purpose and Background

The Business Services Wage Assessment Tool Payment Scheme Act 2015 (the Act) establishes the Business Services Wage Assessment Tool Payment Scheme (the BSWAT Payment Scheme).

Section 102 of the Act provides that the Minister may, by legislative instrument, make rules prescribing matters required or permitted by the Act to be prescribed or which are necessary or convenient to be prescribed in order to carry out or give effect to the Act.

The Business Services Wage Assessment Tool Payment Scheme Rules 2015 (the Rules) provides a framework for the operation of the BSWAT Payment Scheme. They deal with matters such as eligibility, calculating the payment amount, acceptances, internal and external reviews, nominees, disclosure of protected information and legal and financial counselling services.

Chapter 3 of the Rules prescribes the method for calculating payment amounts for persons who are eligible to be offered a payment under the BSWAT Payment Scheme. Broadly, the payment amount is worked out by:

1. calculating the amount the person was actually paid by the Australia Disability Enterprise (the ADE). This is called a person’s “actual wage”;
2. working out what the person would have been paid had the wages been calculated only using the productivity-scored component of an applicable BSWAT assessment for the person. This is called a person’s “productivity‑scored wage”; and
3. working out the difference between the two amounts at (1) and (2) to calculate the payment amount. Applying indexation factors then multiplying this amount by 0.7 and applying taxation considerations.

The purpose of the Business Services Wage Assessment Tool Payment Scheme Amendment Rules (No. 2) 2016 (the Amendment Rules) is to clarify the method of calculating payment amounts under the Rules. The Rules need to be clarified because:

• to calculate the amount a person was actually paid by an ADE, it is necessary to determine how many hours a person worked in certain pay periods. In some cases the only available evidence of hours worked by a person is that reported to Centrelink or the former CRS Australia (CRS). The Rules do not currently address how to undertake the calculation when the reporting periods do not align with the person’s normal pay periods;
• the Rules require a method of how to work out how much tax (if any) a deceased estate may have to pay on a before-tax payment amount. It is necessary to work this out to calculate how much a before-tax payment amount needs to be increased to account for tax;
• the Rules set out assumptions to be made about the amount a person earned in the 2016/17 financial year, but not for the two subsequent financial years. These assumptions are necessary to calculate how much a before-tax payment amount needs to be increased to account for tax;
• the Rules require calculations to be made of the average rates of pay of all employees in workplaces for particular periods (including average productivity scored rates of pay). These average rates of pay are used for persons who were paid a training wage while waiting for a BSWAT assessment to be completed and who never ultimately had a BSWAT assessment completed. The current method for calculating the average rates of pay needs to be amended to account for the available evidence; and
• in some cases there is insufficient evidence of how long persons were employed within an ADE whilst waiting for their first BSWAT assessment to be completed.

The Amendment Rules also make minor amendments to the Rules to clarify the intent of some of the provisions.

The Amendment Rules are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Commencement

The Amendment Rules commence the day after these rules are registered.

Consultation

Before the Rules were originally made in July 2015, consultation was undertaken on the issues surrounding the decision of the Federal Court relating to the use of the BSWAT and other approved wage assessment tools used to calculate the wages of Australian Disability Enterprise employees. In addition, consultations occurred on specific design elements of the BSWAT Payment Scheme.

After the Rules were originally made, a mediated settlement agreement was made between the Commonwealth and the Applicant in a representative proceeding in the Federal Court of Australia (Duval-Comrie v the Commonwealth VID 1367/2013). As part of the settlement, the Applicant agreed that he and other members of the proceeding will use the BSWAT Payment Scheme as a vehicle for making payments in relation to the use of the BSWAT. That settlement led to the enactment of the Business Services Wage Assessment Tool Payment Scheme Amendment Act 2016 (the Amendment Act) and the making of the Business Services Wage Assessment Tool Payment Scheme Amendment Rules 2016. Consultation was undertaken as part of the mediated settlement process, including with:

• the Applicant, through Maurice Blackburn Lawyers (the Applicant’s representative) regarding settlement terms; and
• AED Legal Centre regarding settlement terms.

Since the Rules were last amended, the Department has informed the Applicant’s representative of some of the matters affecting the calculation of payment amounts under the Rules and in particular the matter of person’s pay periods not aligning with reporting periods. The Applicant’s representative has been informed of the need for amendments to the Rules. Whilst considering the need for those amendments, the Department identified other matters in the Rules which required clarification. Further consultation has not been undertaken in circumstances where prior consultation has occurred in respect of the BSWAT Payment Scheme and Rules, and the amendments are made to clarify the method of calculating payment amounts under the Rules. It was considered that further consultation was unnecessary in these circumstances.

Regulation Impact Statement (RIS)

The Office of Best Practice Regulation (OBPR) has been consulted and advised a RIS is not required. The OBPR reference for this consultation and advice is 21564.

Explanation of the provisions

Schedule 1 - Amendments

Item 1 inserts a definition for “training wage determination”. A training wage determination is a determination made under the newly inserted Part 5 of Chapter 3. This is explained at item 13.

Item 2 amends the definition of “average BSWATR assessed rate” to refer to the new section 3.24. Section 3.24 is explained at item 13.

Item 3 amends the definition of “child welfare agency” to refer to subsection 8.03(2), where the term is currently defined.

Item 4 inserts a new subsection (3) into section 3.02 of the Rules.

The Rules require calculations to be made in respect of “eligible periods”. Subsection 3.02(2) of the Rules defines the term “eligible period” for a person as the person’s normal pay period in which there was an eligible day for the person. “Eligible day” is defined by subsection 6(2) of the Act.

In some cases, payslips (or other records from ADEs) are not available as evidence of how many hours a person worked in their normal pay period. In these circumstances, section 3.07 of the Rules permits other available evidence to be used. Specifically:

• centrelink data records may be used if they record the number of hours a person worked in a relevant period, provided the number of hours is equal to or greater than 16 hours; otherwise
• CRS data records for a person may be used.

These data records may not record the person’s actual pay period. Also the frequency at which the data was reported to Centrelink or CRS may not align with the person’s actual pay periods.

New subsection (3) sets out what evidence may be used to determine a person's ‘normal pay period’ for the purposes of the Rules. In descending order of availability, it permits the following evidence to be used:

• payslips or other documents from the ADE verifying the number of hours worked;
• centrelink data, if that data records a reporting period used by Centrelink;
• a person’s CRS data records if that data records the interval at which a person was paid; or
• other data records which record at which a person was paid.

The new subsection allows the evidence which is permitted to be used to determine the number of hours a person worked, to also be used to determine what the pay period was for those hours. For example, if the only record of the hours a person worked is that reported to Centrelink once a fortnight, the person’s normal pay period can be taken to align with that Centrelink reporting period.

Item 5 clarifies section 3.05 of the Rules. It deletes the words “an hourly wage” from that section because Part 2 of Chapter 3 of the Rules sets out how to work out the total wages a person was paid in respect of all eligible days.

Item 6 omits subsection 3.08(1) and inserts a new subsection 3.08(1).

Clarification of minimum wage increases

New paragraph 3.08(1)(a) clarifies that a national minimum wage increase is taken to have increased a person’s BSWAT assessed wage from the date of a national minimum wage increase.

Hourly rate of pay for employees who never had a BSWAT assessment

New paragraph 3.08(1)(b) provides a new mechanism to determine the hourly rate of pay to use to calculate the actual wage of a person who does not have a BSWATR because they were paid a training wage while waiting for a BSWAT assessment to be completed and never had BSWAT assessment completed. The rate to use is the average BSWATR assessed rate specified in the applicable training wage determination made under the newly inserted Part 5 of Chapter 3. Part 5 is explained at item 13.

Item 7 omits paragraph 3.08(2)(c). It inserts a new paragraph 3.08(2)(c) to clarify that a person’s assessed rate from their first BSWAT assessment is used to calculate the actual wage they received while waiting for that BSWAT assessment to be completed. The award rate from their first BSWAT assessment is also used to calculate the productivity-scored wage of the person for the period they waited for that BSWAT assessment to be completed.

Item 8 omits subsection 3.08(3). It inserts a new subsection 3.08(3) to address the circumstance where there is insufficient evidence of how long a person waited for their first BSWAT assessment to be completed. It is necessary to determine this for the purpose of calculating payment amounts.

In many cases, the period of time a person waited for the first BSWAT assessment to be completed aligns with the period between the person entering an ADE and their first BSWAT assessment. In some cases however, this will not be the relevant period. This is the case for a person employed within an ADE that transitioned to the BSWAT from another wage assessment tool.

If there is insufficient evidence of how long a person waited for their first BSWAT assessment to be completed, the new subsection permits the Secretary to presume that the period of time was 180 days. Generally the longest time a person waited for their first BSWAT assessment to be completed was about 90 days. In effect, if the presumption is applied, any payment amount would be calculated from 180 days before the person’s first BSWAT assessment. Although any days occurring before 1 January 2004 would be excluded as that is the earliest date from which any payment amount can be calculate, in accordance with section 6 of the Act.

The presumption will not be applied if there is sufficient evidence that a person waited a shorter or longer time for their first BSWAT assessment to be completed. Instead, that evidence would be relied upon to calculate the payment amount.

Item 9 omits section 3.10 and inserts a new section 3.10 that specifies which of two methods to follow to work out a person’s productivity-scored wage.

The first method is specified in sections 3.11 to 3.14. This is the current method used to work out a person’s productivity-scored wage. This method will continue to be used for a person who has a BSWATR assessed rate.

The second method is to be specified in new subsection 3.14(2) inserted by item 11. The second method is explained under item 11.

Item 10 amends paragraph 3.11(a) to clarify that a national minimum wage increase is taken to have increased the hourly award rate shown a person’s BSWATR from the date of the national minimum wage increase.

Item 11 omits section 3.14 and inserts a new section 3.14.

Paragraphs 3.14(a) and (b) set out the method to be used to work out the productivity-scored wage of a person who has had a BSWAT assessment.

Paragraph 3.14(c) sets out an alternative method for working out the productivity-scored wage of a person who does not have a BSWATR assessed rate because they were paid a training wage while waiting for a BSWAT assessment to be completed and never had that assessment completed.

Under this method, a person’s productivity-scored wage, for each eligible period, will be calculated by multiplying:

• the number of hours worked by a person in each eligible period, as determined in accordance with section 3.07 of the Rules; and
• the average productivity-scored rate specified in an applicable training wage determination made under the newly inserted Part 5 of Chapter 3.

Item 12 omits subsection 3.20(1) and inserts a new subsection 3.20(1). The new subsection includes additional assumptions to be made to determine the amount of income a person will have earned in the 2017-2018 or 2018-2019 financial years.

The assumptions in subsection (1) are required to be made in order to work out how much tax (if any) a person may have to pay on the before-tax payment amount. These assumptions are required in order to work out how much the before-tax payment amount needs to be increased to account for tax. Presently, the assumptions set out in the Rules include:

(b) the amount that the person earned in the 2015-2016 financial year as recorded in the person’s centrelink or CRS data (whichever is higher) is the amount that the person earned in the 2016-2017 financial year.

The Rules do not currently provide for similar assumptions to be made about the amount of income a person will have earned in the 2017-2018 or 2018-2019 financial years. Item 12 inserts assumptions for these financial years. This is necessary as payment amounts can be offered up until 1 December 2018, and as the amount of tax payable on those amounts will depend on how much other income (if any) is received in total by the person in the financial year that the payment is made.

Item 13 inserts new subsections 3.20(2) and (3), and Part 5 of Chapter 3.

Subsections 3.20(2) and (3)

These new subsections insert two assumptions required to be made in order to work out how much tax (if any) a deceased estate may have to pay on a payment amount. A payment amount is increased by that amount of tax.

The assumptions are:

• section 99 of the Income Tax Assessment Act 1936 (the ITA Act) applies to the deceased estate; and
• the deceased estate has not received and will not receive any other income in the income tax year that any payment amount was made to the deceased person.

The first assumption is made because it is expected that the Commissioner of Taxation would assess the tax liability of the deceased estate under section 99 of the ITA Act, instead of under section 99A.

If section 99A applies, all income would be taxed at the top marginal rate for individuals who are Australian residents for tax purposes. Section 99A provides the Commissioner of Taxation with the discretion to assess the taxation of a deceased estate under section 99, if he or she is of the opinion that it would be unreasonable for taxation to be assessed under section 99A.

The second assumption is made because the amount of tax payable on the payment amount, in accordance with section 99 of the ITA Act, depends on how much income a deceased estate will receive in total in the income tax year that the payment amount is received. The basis for the assumption is that it is expected that the payment amount will be the only income received by the deceased estate in the relevant income tax year.

The second assumption is analogous to the assumption made in paragraph 3.20(1)(b) about the amount of income a person will earn in the 2016-2017 financial year.

Part 5 of Chapter 3

This new Part provides a mechanism for calculating the payment amounts for those people whose wages were never assessed using the BSWAT but instead were paid a training wage while waiting for a BSWAT assessment to be completed.

Section 3.21 describes the purpose of the new Part.

Section 3.22 provides for the Secretary to make, and publish, a training wage determination which applies to a particular ADE for a particular financial year. The training wage determination must specify:

• the average BSWATR assessed rate for the ADE for a particular financial year. This is an hourly rate of pay, based on an average of the hourly rates of pay of person’s employed within the ADE; and
• the average BSWATR productivity-scored rate for the ADE for a particular financial year. This is an hourly rate of pay, based on an average of the BSWATR productivity-scored hourly rates of pay of person’s employed within the ADE.

Section 3.23 requires the Secretary to make a training wage determination for an ADE whenever one is necessary to calculate a person’s actual wage (under paragraph 3.08(2)(c)) or their productivity-scored wage (under subsection 3.14(2)).

Section 3.24 set out the method for calculating the average BSWATR assessed rate for an ADE for a particular financial year. This method requires the Secretary to determine the average of:

a)     the average assessed wage of all employees at the ADE whose wages were assessed with the BSWAT as at 20 September of the relevant financial year (or the next business day); and

b)     the average assessed wage of all employees at the ADE whose wages were assessed with the BSWAT as at 20 March of the relevant financial year (or the next business day).

The assessed wage of each employee to be used in the method at (a) or (b) will be determined in a similar manner to that in subsection 3.08(1). The Secretary will collate each employee’s wage rate specified in the BSWATR which applied to the person on the day the average is determined. The rate specified in the BSWATR will be adjusted for any minimum wage increases as necessary.

Section 3.25 specifies the method for calculating the average BSWATR productivity‑scored rate for an ADE for a particular financial year. This method requires the Secretary to:

• work out the average BSWATR award rate. This is worked out in the same way that the average BSWATR assessed rate is worked out under section 3.24, except that the average is taken of hourly award rates instead of assessed wages. The difference is that an assessed wage is a proportion of the hourly award rate, as determined under the BSWAT;
• work out the average BSWATR productivity component percentage. This is also worked out in the same way that the average BSWATR assessed rate is worked out under section 3.24, except that it is an average of BSWATR productivity scores (expressed as a percentage);
• multiply the average BSWATR award rate by the average BSWATR productivity component percentage.

For example, if the average BSWATR award rate is $10, and the average BSWATR productivity component percentage is 60%, the average BSWATR productivity‑scored rate would be $6.00.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Business Services Wage Assessment Tool Payment Scheme Amendment Rules (No. 2) 2016

This instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the legislative instrument

The Business Services Wage Assessment Tool Payment Scheme Amendment Rules (No. 2) 2016 (the Amendment Rules) is made to amend the Business Services Wage Assessment Tool Payment Scheme Rules 2015 (the Rules). The Rules are made under section 102 of the Business Services Wage Assessment Tool Payment Scheme Act 2015 (the Act), and provide a framework for the Business Services Wage Assessment Tool Payment Scheme (the BSWAT Payment Scheme) established by the Act.

The BSWAT Payment Scheme was established to provide additional payments, in certain circumstances, to eligible supported employees with an intellectual impairment whose wages were assessed and paid using the BSWAT.

The Amendment Rules specifically amend provisions in Chapter 3 of the Rules which prescribe the method for calculating payment amounts for persons who are eligible to be offered a payment under the BSWAT Payment Scheme.

Broadly, the payment amount is worked out by:

1. calculating the amount the person was actually paid by the Australia Disability Enterprise (the ADE). This is called a person’s “actual wage”;
2. working out what the person would have been paid had the wages been calculated only using the productivity-scored component of an applicable BSWAT assessment for the person. This is called a person’s “productivity-scored wage”; and
3. working out the difference between the two amounts at (1) and (2) to calculate the payment amount. Applying indexation factors then multiplying this amount by 0.7 and applying taxation considerations.

The Amendment Rules amend the Rules to:

• permit data from Centrelink or CRS Australia (CRS) to be used, if necessary, to determine the pay period used to calculate the amount a person was actually paid by an ADE. This data can already be used to determine the number of hours a person worked at an ADE if a person’s payslip is not available. However in those circumstances there may not be evidence of the person’s actual pay period, and the frequency of reports to Centrelink or CRS may not align with the person’s actual pay period. The Amendment Rules allow the reporting period to Centrelink or CRS to be used as the person’s normal pay period, if necessary;
• set out assumptions required to be made when working out how much tax (if any) a deceased estate may have to pay on a payment amount. A payment amount is increased by that amount;
• set out assumptions required to be made when working out how much tax (if any) a person may have to pay on a payment amount made in the 2017-2018 or 2018-2019 financial years;
• set out a new method for calculating the actual, and productivity-scored, wages of a person who never had their wages assessed using the BSWAT because they were paid a training wage while waiting for a BSWAT assessment to be completed and never had a BSWAT assessment completed. The current method requires an average to be taken, on every day the person was employed, of the rates of pay of all employees at an ADE whose wages were assessed using the BSWAT. This requirement is extremely difficult to satisfy with the evidence available. The new method requires averages to be taken, at two points in time in a relevant financial year, of the wages of all employees at an ADE whose wages were assessed using the BSWAT;
• clarify that a person’s assessed rate from their first BSWAT assessment is used to calculate the actual wage they received while waiting for that BSWAT assessment to be completed. The award rate from their first BSWAT assessment is also used to calculate the productivity-scored wage of the person for the period they waited for that BSWAT assessment to be completed;
• set out the presumption that a person waits 180 days for their first BSWAT assessment to be completed if there is no other evidence to establish the length of the period which commenced when preparations started for the person’s first BSWAT assessment and concluded when that first BSWAT assessment was completed. Generally the longest time a person waited for their first BSWAT assessment to be completed was about 90 days. In effect, if the presumption is applied, any payment amount would be calculated from 180 days before the person’s first BSWAT assessment. Although any days occurring before 1 January 2004 would be excluded as that is the earliest date from which any payment amount can be calculate, in accordance with section 6 of the Act. The presumption will not apply if there is sufficient evidence that a person waited a shorter or longer time for their first BSWAT assessment to be completed. Instead, that evidence would be relied upon to calculate the payment amount.

The Amendment Rules also make minor amendments to the Rules to clarify the intent of some of the provisions.

The Amendment Rules promote the following human rights:

• Rights to an effective remedy

Human rights implications

Rights to an effective remedy

People with intellectual impairment who have previously had their wages assessed by the BSWAT may choose an effective remedy through a number of options:

• accepting an offer under the BSWAT Payment Scheme; or
• by remaining in a relevant representative proceedings; or
• taking part in other legal proceedings.

The establishment of the BSWAT Payment Scheme provides additional choice and control for people with disability. The Rules operationalise the BSWAT Payment Scheme and provide participants with certainty on the method used to calculate the payment amount. Individuals are able to consider an offer made through the BSWAT Payment Scheme and choose the option which they believe best suits their individual circumstances.

The Amendment Rules clarify the use of evidence for calculating an offer under the
BSWAT Payment Scheme. This allows those assessing application to make the most fair and reasonable determination, with the data and evidence available to the Department.

The Amendment Rules also specify how to calculate any expected tax liability to be included in a payment to a deceased estate consistent with the Income Tax Assessment Act 1936.

The Amendment Rules provides clarification of the payment calculations for those that were employed by an ADE that used BSWAT but were not able to be assessed by the tool prior to leaving employment at that ADE. As the BSWAT assessment is used as the core basis for the offer, the amendments further provide a way to calculate the offer for those that did not have a BSWAT assessment due to the above mentioned circumstances.

The Amendment rules further provides a presumption that an individual may have waited up to six months prior to being assessed on the BSWAT, allowing for a generous presumptions where evidence is not available for that period. If the applicant worked longer than 6 months prior to their BSWAT assessment, review provisions allow for the applicant to produce additional evidence.

Conclusion

The Amendment Rules are compatible with human rights because they advance
the protection of human rights and to the extent that they may limit human rights, those limitations are reasonable, necessary and proportionate.