Published: 21 March 2012
Author: Shaun Marcus
New WorkCover law enables Treasurer to tax at will
Legislation just introduced by the Baillieu Government will give the Treasurer, Kim Wells, the power to tax the Victorian WorkCover Authority at will.
The government late last year flagged its intention to pull $471M out of the WorkCover scheme as a "dividend" over the next four years, which is really just a raid on its cash. It was met with howls of protest from many, including the former Chairman of the Victorian WorkCover Authority, James MacKenzie, who slammed it saying, "The big risk is that employer premiums will have to rise, or benefits to injured workers will have to be slashed".
But the Government has been staring down its critics and, against all expectations, is now giving the Treasurer and the Department of Treasury and Finance the power to determine how much they will remove from the WorkCover coffers each year.
With these new powers under his belt, the Treasurer will be able to assess the size of the Government's potential financial black hole and then decide how much exactly it needs to withdraw from WorkCover. No need for parliamentary oversight, no guidelines, no safeguards. When you consider that it is Victorian businesses that fund WorkCover through their premium payments, this move by Baillieu is essentially a new State business tax that is decided by him, at a whim. What the move does is make it increasingly attractive for Victorian companies to desert WorkCover in favour of private self insurance, putting even more premiums pressure on a diminishing number of companies left in the pool.
The government says it will not cut benefits and that those benefits are enshrined in legislation. But what they don't reveal is that they are in the middle of re-drawing the legislation governing the workers compensation scheme. So it may only be a matter of time before those entitlements are enshrined in new legislation that, not surprisingly, shrinks them. Of course, it may all be a big coincidence that the government is reviewing workers comp laws at the same time they are yanking a huge "dividend" out of the scheme.
Victoria proudly boasts the most financially sound workers compensation scheme in Australia, as witnessed in a recent report by SafeWork Australia (Comparative Performance Monitoring Report 13th Edition, October 2011). Unlike many such schemes around the world, WorkCover has no unfunded claims liabilities and a strong balance sheet, which means it can continue to improve safety within Victoria while keeping premiums to a minimum. But it is always under cost pressure and last year, for example, it recorded a $641 million loss in the six months of the financial year to December 2011.
The Victorian Government should be doing all that it can to continue to support WorkCover so that it can promote workplace safety for employees and provide injured workers benefits. Allowing the government to pay dividends to itself, at a level it determines, from the revenue of WorkCover, potentially puts at risk the rights and benefits of injured workers.
Shaun Marcus is a Senior Associate with Ryan Carlisle Thomas.