On 1 July 2015, some important changes to Australian employment law came into effect. All employers should be aware of the following changes:
Increase in maximum penalty and penalty units
The first change in the employment law is the increase in the maximum penalty for breaches of the Fair Work Act 2009 (Cth) for both companies and individuals.
Employers now face a higher maximum penalty for breaches of the Fair Work Act. Recently, adverse action claims have involved the company as well as more than one member of staff, which means that the maximum penalty increase will have a greater impact. See this post ” for more detailed information.
High-income threshold increase
Employees who earn a maximum of $136,700 per annum are now covered by the Fair Work Act, a new high-income threshold for the financial year. Last year’s threshold was $133,000.
‘Earnings’ has a distinct definition under the Fair Work Act, and includes an employee’s entire income, salary sacrifice, and any other payments, including non-monetary benefits, as long as they can be determined in advance.
Employers need to consider this new threshold when considering the risk of unfair dismissal claims from high-earning employees.
Superannuation guarantee frozen
The former Labor government had legislated a scheduled rise in the Superannuation Guarantee for this year. However, the current Federal government froze that schedule in its current place. The 9.5% Superannuation Guarantee will remain for six years with a planned increase to 10% from 1 July 2021, and incremental changes to meet the target Superannuation Guarantee of 12% by July 2025.
Many employers drafted contracts that included an increase in superannuation in line with the government’s proposed changes. It is important that these contracts are now reviewed.
Threshold for genuine redundancy under employment law
Genuine redundancy payments made to employees are tax-free up to a threshold amount, which is increased on 1st July each year.
For the 2015/16 financial year, the tax-free maximum genuine redundancy payment is $9,780 as well as an additional $4,891 for every year of service that the employee has completed with the company.
If the employee exceeds this maximum threshold, the entire amount is paid as an employee termination payment (ETP). ETPs are taxed according to the ETP cap.
ETP cap and group certificates
The ETP cap has been increased to $195,000. For anything less than the ETP cap, a concessional tax rate is paid at either 17% or 32% depending on the age of the employee. Any payments over the cap are taxed at the top marginal tax rate.
When paying ETP, a group certificate now needs to be issued within 14 days of payment and not at the end of the financial year with other group certificates.