Explanatory Memorandum
(Circulated by authority of the Minister for Employment, Education and Training, the Hon. John Dawkins, MP)MAIN FEATURES
Purpose of the Bill
As reflected in its Objects clause, the Bill is focussed on improving the efficiency and international competitiveness of Australian industry by increasing both the level and quality of employment related skills of the Australian workforce in terms of productivity, flexibility and safety.
Skill levels are to be increased by raising the aggregate level of investment in training by employers and by improving the distribution of training effort amongst employers. At the same time, the quality of skills are to be improved by encouraging the adoption of structured training.
These objectives are to be addressed by requiring that all employers to which the Training Guarantee applies, undertake at least a specified minimum expenditure on structured training each year. In addition, the Training Guarantee should have the effect of accelerating change in industry perceptions of the value of employment related training.
It is also intended that the Training Guarantee, as far as possible, involve a minimum administrative burden on employers.
General Application of the Training Guarantee
The Training Guarantee imposes a minimum training requirement on employers set at a percentage of an employer's annual national payroll. The rate is 1 per cent for the year commencing on 1 July 1990 and 1.5 per cent from 1 July 1992. Employers who spend less than the minimum training requirement on eligible training activities in any financial year become liable to pay a training guarantee charge equal to the shortfall. In keeping with Constitutional requirements, the liability to pay the charge is imposed by a separate legislative instrument (the Training Guarantee Act).
Employers with annual national payrolls below a threshold, set at $200,000 for the year beginning 1 July 1990, will be exempt from the Training Guarantee. This threshold is to be indexed to the full-time adult average weekly total earnings (AWE) estimates by the Australian Bureau of Statistics for the March quarter.
Specific exemptions are also given to public benevolent institutions (excluding public hospitals) and to religious institutions in relation to the carrying out of pastoral duties or the practice, study, teaching and propagation of religious beliefs.
International organisations and foreign government representatives are also exempt by the operation of other Commonwealth Acts.
The Training Guarantee will apply to the public sector as well as the private sector. In the Australian Public Service, each Department will be treated as a separate employer.
Each State and Territory Government will be regarded as one employer. State and Commonwealth statutory authorities and government business enterprises, where these are employers in their own right, will be treated as separate employers.
Eligible Training Expenditure
Eligible training is broadly defined to encompass, among other things, structured on-the-job and off-the-job training. Similarly, the range of persons who can receive training is wide including owner managers, managers, other employees and cadets. While it is probable that an enterprise's own employees would account for most of its training expenditure, employers are not limited solely to training their immediate workforce in terms of eligible training expenditure.
A key concept is an eligible training program.
A training program comprises one or more periods of training. It may, for example, be intended to impart a range of skills and competencies to a particular person over a specified time period, or, it may be intended to impart the same particular skills to a number of persons.
An eligible training program can include both on-the-job and off-the-job training, but must:
- •
- be structured; and
- •
- have as the principal objective the development, maintenance or improvement of employment related skills and competencies.
The definition of a structured training program requires that:
- •
- the skills to be acquired by participants in the training program, the means of imparting the skills, and expected program outcomes, are clearly identified before the start of the program; and
- •
- the training program is either:
- -
- designed by a person or persons who has a working knowledge of the subject area and has successfully completed at least a short course in trainer training or has experience in the design and conduct of training; or
- -
- designed by a person without these qualifications or experience but approved by a person or persons with these qualifications or experience.
When a training program includes on-the-job training, it
- •
- must include a period of instruction; and
- •
- may include a period of related, closely supervised practice.
However, further periods of generally supervised practice and work experience are not included in an eligible training program.
Eligible training expenditure is any (net) expenditure incurred by the employer which is directly attributable to an eligible training program and arises solely or principally from an eligible training program. Net expenditure is total expenditure less any Government subsidy (for example, the Commonwealth apprenticeship rebates) and reimbursements from other parties.
Expenditure which is directly related to any of the following activities would fall within (but not limit) this broad definition:
- •
- determining the need for eligible training programs;
- •
- preparing and reviewing strategic and other training plans;
- •
- developing, providing, evaluating and administering eligible training programs; and
- •
- developing and administering accounting and information systems in relation to eligible training programs.
Examples of the type of expenditure which would be eligible include:
- •
- salary and wages of employees while they are participating in an eligible training program or engaged in the related training activities as outlined in subclause 25(2);
- •
- travel, accommodation, meals and child care costs which are directly attributable to periods when employees and other persons (including owner managers) are participating in an eligible training program or related training activities as outlined in subclause 25(2);
- •
- payment of fees for eligible training programs including contributions towards the Higher Education Contribution Scheme;
- •
- costs of training materials and materials which are consumed in eligible training programs; and
- •
- expenses incurred on buildings and equipment used solely or principally for the purpose of engaging in eligible training activities.
In addition, amounts paid, and the value of property donated, to other bodies which perform the activities listed in subclause 25(2) would also be counted as eligible training expenditure, provided that the recipient body uses the funds solely to enable it to carry out these activities. Types of bodies which might be eligible include:
- •
- tertiary education institutions;
- •
- industry skill centres; and
- •
- tripartite industry training bodies.
Payments made by employers under specific industry training levies, which use their funds solely for activities outlined in subclause 25(2), would also constitute eligible training expenditure.
To be eligible training expenditure, a particular expense must not only be directly attributable to an eligible training program (in the manner discussed above) but must also arise solely or principally from an eligible training program. This requirement is important in the case of lumpy expenses which are incurred jointly as a result of eligible training programs and other activities. If the eligible training program is the principal cause (i.e. more than half) of the expense, all of the expenditure is eligible. If the eligible training program is not the principal cause, none of the expenditure is eligible. This approach is adopted so there is no need for administratively complex apportionment procedures.
It will normally be possible to determine the length of periods when a person is participating in an eligible training program or engaged in related activities. Wage and salary costs should relate only to these periods. On some occasions an employee may be simultaneously participating in an eligible training program and involved in other work activities. The full wage and salary costs of these periods will be eligible training expenditure, provided:
- •
- it is not possible to differentiate the time spent on the different activities (e.g. in the case of on-the-job training); and
- •
- participation in the eligible training program is the principal activity of the person.
For trainees employed under the Australian Traineeship System and apprentices, employers have the option of claiming a minimum allowable amount of expenditure or the actual amount arrived at by applying the general rules.
In the case of a training institution in its capacity as an employer, any expenditures, subsidies and reimbursements of the training institution that are not directly attributable solely or principally to employees of the institution are to be disregarded in calculating eligible training expenditure.
Training advisory body
There is a need for an agency to advise on guidelines for eligible training expenditure, to deal with issues of interpretation with respect to the definition of training and to provide rulings to the Commissioner of Taxation when requested to do so. Agreement of the States and Territories for the National Training Board to fulfill these roles has been sought.
Industry Training agents
Provision is made for industry training bodies and industry associations to act as training agents. Where an industry body elects to take on the role of training agent it will be required to seek registration with the training advisory body.
The function of a training agent will be to advise employers within their industry on eligible training programs and eligible training expenditure. It will be able to issue certificates on whether particular proposed expenditures and programs are eligible and these will have the same status as those issued by the training advisory body.
Training Guarantee Fund
Any revenue collected under the Training Guarantee will be paid into the Training Guarantee Fund, which will be a special trust account within the Consolidated Revenue Fund.
Money in the Fund will be used to reimburse the Commonwealth for administration of the Training Guarantee scheme and for monitoring and reporting on its operation. Refunds of overpayments or payments made in error will also be made from the Fund. Revenue net of the above amounts will be notionally allocated to all States and Territories. A State or Territory which has a training guarantee agreement with the Commonwealth will receive its revenue share as determined above. Where there is no Training Guarantee agreement in force with respect to any State or Territory, the Commonwealth may use the amount that would otherwise have been allocated to the State or Territory for training-related activities consistent with the objectives of the Act.
Provision is also made for the Fund to receive any repayment of revenue paid to a State or Territory that fails to comply with the training guarantee agreement and for the deduction from any subsequent payment to a State or Territory of any unspent part of an earlier payment, or expenditure in contravention of the terms of the agreement.
Training Guarantee Agreements with States and Territories
The Minister is empowered to make agreements with the States and Territories concerning payments to them from the Fund and the conditions attaching to such payments.
Each agreement will include clauses to the effect that the State or Territory supports the Training Guarantee scheme and agrees to spend its share of revenue on additional eligible training activities on the advice of a designated tripartite body.
Failure to comply with Training Guarantee agreement
These clauses provide for the Minister to give notice to a State or Territory of any contravention of the agreement and for possible recovery of all or part of Commonwealth payments made under the agreement. Alternatively, the Minister may deduct from any further payment any amount unspent from a preceding payment or not spent in accordance with the agreement.
Administration
The administration of the training guarantee scheme will rest with the Commissioner of Taxation. Collection and recovery of training guarantee charge provisions, including those relating to penalties for late payment etc., will be modelled on those operating for income tax.
Training guarantee charge year
Liability to the training guarantee charge will be assessed on an annual basis with the charge year being the normal financial year, i.e. 1 July to 30 June. The first "charge year" will be the year ending 30 June 1991.
Self-assessment
Employers will self-assess their liability to pay the training guarantee charge. This will entail calculating the liability and remitting the charge so calculated with an annual training guarantee statement by 30 September following the end of the charge year.
Only those employers who fail to expend the necessary amount on eligible training and therefore will be liable to pay the shortfall charge will be required to lodge a statement, unless specifically requested in writing to do so by the Commissioner.
The lodgement of a training guarantee charge statement will, for all practical purposes, constitute an assessment of an employer's training charge liability. The assessment will be deemed to have been made on the date by which the employer is required to make payment of the charge (30 September). If the statement is furnished after the payment date the assessment will be deemed to have been made on the date the statement is furnished.
If a training guarantee statement is not lodged by the due date and the Commissioner believes that the employer has a liability to pay the training guarantee charge, the Commissioner will be able to make a formal assessment of the training guarantee shortfall and the amount of the training guarantee charge to which, in the Commissioner's opinion, the employer is liable. Alternatively, the Commissioner may require an employer to lodge a training guarantee statement for a particular year.
Amendments
Where an assessment has been made of an employer's training guarantee charge liability, including an assessment deemed to have been made by virtue of the lodging of the employer's training guarantee statement, the Commissioner will be authorised to amend the assessment, broadly according to the rules that apply for assessments made under income tax law.