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T h e
W o r k C h o i c e s
L e g I s l a t I o n
The introduction of the Work-Choices legislation on March 27 has provoked widespread controversy
and confusion. So what exactly is WorkChoices all about?
Unfair dismissal
Dawn of the WorkChoices era
The effect of WorkChoices is that it has brought about a return of the pre 1984 position in relation to unfair
dismissal for those employees that are unable to jump through the following 3 hoops:
(i) the 100 employee requirement, (ii) the sixmonth requirement, and (iii) The "genuine operational reason"
requirement.
A claim for unfair dismissal will now not be able to be made to the AIRC by an employee who works for an employer that
employs 100 or fewer employees. This number is based on full-time, part-time and any casual employees who have been
employed by the employer on a regular and systematic basis for at least 12 months. Some related companies of the
employer’s company will be treated as one entity. A claim for unfair dismissal against an employer who employs more
than 100 employees may only be made to the AIRC after the employee has worked for 6 months or more with that employer.
Even if the employee is able to jump through these first two hoops, the employee’s claim may still be dismissed if the
AIRC is satisfied that the employee’s employment was terminated for genuine operational reasons or for reasons that
included genuine operational reasons – i.e. reasons of an economic, technological, structural or similar nature
relating to the employer’s business or part of the business.
This means that just to satisfy the threshold requirements for claiming unfair dismissal, the employee (i) needs to
have been employed by an employer with over 100 employees, (ii) needs to have worked for six months or more for that
employer, and (iii) must show that his/her termination did not include genuine operational reasons.
Unlawful dismissal
Unlawful termination is when an
employer terminates an employee’s
employment on certain discriminatory
grounds. Under WorkChoices, a
dismissed employee’s ability to
make a claim for unlawful dismissal
has in fact been somewhat
strengthened. Importantly, unlawful
termination provisions apply to all
employees in Australia. Employees
who are excluded from making
unfair dismissal claims are not
excluded from making unlawful
termination claims. Additionally,
some employees will now be eligible
for up to $4000 worth of financial
assistance to pursue their
unlawful dismissal claim.
The unlawful termination grounds
> temporary absence from work because of illness or injury;
> trade union membership (or non-membership) or participation in trade union activities;
> seeking office as a representative of employees;
> the filing of a complaint, or the participation in proceedings, against an employer;
> race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin;
> refusing to negotiate, sign, extend, vary or terminate an Australian Workplace Agreement;
> absence from work during maternity leave or other parental leave; and
> temporary absence from work because of the carrying out of a voluntary emergency management activity.
Australian Workplace Agreements There is no longer any requirement to have Australian Workplace Agreements (AWA)
certified by the AIRC. All that is now required is lodgement and this can be done online through the Office of the
Employment Advocate. The ‘no disadvantage test’ (which ascertained whether employees to be covered under AWAs would be
any worse off compared to the terms of their applicable awards) has been abolished.
Our office receives many inquiries from employers who are confused about the difference between an AWA and a common
law contract of employment. It is imperative to point out that many employees are already covered by award provisions
governing, inter alia, their rates of pay, penalty rates, over time, public holidays, and annual leave loading. The
new legislation preserves all of these protected award conditions and the only way these can be varied is through the
making of an AWA. They cannot be excluded through the making of an ordinary common law contract of employment.
In this regard, it is absolutely vital that employers seek legal advice so as to be able to determine the particular
award entitlements applicable to their employees, or risk being faced with multiple damages claims down the track.
Additionally, legal advice should also be sought if an employer seeks to vary any of the protected award conditions
which would require the making of an AWA. If an AWA is lodged and it contains what is referred to as “prohibited
content,” the employer may be liable for a fine of up to $33,000.
Please contact Alan Rosendorff of our office on 9011 8353 or David Natenzon of our office on 9011 8357 for advice on
the making of employment agreements and any other employment law issues.
BUDGET 2006
CAPITAL GAINS TAX BREAKS
More owners win capital gains tax breaks
Following the budget, more small-business owners will be eligible for smallbusiness
capital gains tax concessions. The new measures include:
- Increasing the net asset value threshold to $6 million.
- Exempting small-business owners from the net asset value test if they are in the simplified tax system.
- A new 20 per cent significant individual test.
Despite these changes, the fundamentals of small-business CGT concessions
remain: Companies still get no benefit from the 50 per cent general
CGT discount; there is no significant benefit for unit trusts and companies
from the active asset exemption; unless a business owner is retiring, owners
do not qualify for the 15 year asset exemption.
The next CGT concession is the 50 per cent active assets concession. Businesses
owned through companies and unit trusts do not benefit from the
active assets discount because of the way unfranked dividends and nontaxable
trust distributions are taxed. This discount is applied after the general
50 per cent discount.
For businesses owned by individuals, partnerships and discretionary trusts,
the active assets concession means that, as long as the other tests are
met, tax is paid on 25 per cent of the gain made on the sale of active business
assets. Instead of taking this concession, shareholders and unit holders
have the option of using either of the two remaining small-business CGT
benefits, the retirement exemption and the asset rollover. Of these, the
retirement exemption is the most tax effective. Under this exemption, a gain
of up to $500,000 is exempt from tax, and if rolled into a super fund is
treated as an undeducted contribution. The Federal Government has confirmed
that retirement exemptions rolled into a super fund will not be affected
by the new annual undeducted contribution limit of $150,000.
To claim the retirement exemption, the business does not have to be sold,
just an active asset. For example, a business relocates and sells its premises.
Because the premises are an active asset, a capital gain on its sale -- if
the other conditions are met -- would qualify for the retirement exemption.
But the employed owner would have to resign to qualify.
The $500,000 is a lifetime limit that came in on August 20, 1996. Then, It
was reasonably generous but, because it is not indexed to inflation, its
relative value has decreased. To keep pace with Inflation, if you applied an
annual compounding inflation rate of 3.5 per cent to $500,000 for 20
years, the limit would be about $995,000 by 2016.
There is a misconception that to receive the retirement exemption, the
proceeds of the capital gain must be rolled into a super fund. This only
applies to taxpayers aged under 55. For those 55 and over, they can claim
the retirement exemption and use the funds as they wish.
When the active asset being sold is owned by a company or a trust, the
retirement exemption is not available to all owners. Before the budget, the
exemption was only available to a controlling individual who owned at least
50 per cent of the business and possibly one concession stakeholder. With
the new regulations, significant individuals with at least 20 per cent of the
business will be able to claim the exemption.
For shareholders, unit holders and beneficiaries of a discretionary trust to
be eligible for the retirement exemption, they must be paid an eligible termination
payment from the proceeds of the sale. The ETP payment must be
made by the later of seven days after making the choice to claim the retirement
exemption or when the capital proceeds are received. This means the
retirement exemption can be claimed when an active asset is sold and the
proceeds are received over a long period of time, such as when vendor’s
terms have been offered.
AN INTERESTING AND
AMUSING ANECDOTE...
A lawyer was summing up his client’s case at the end of a
jury trial. His client had been charged with murder. There
was however one unusual feature about the case. The
body of the alleged victim had never been recovered.
When addressing the jury the lawyer stated that there must
be some doubt about his client’s guilt. He emphasised this
by saying that the body of the alleged victim had not been
recovered and therefore there must be some doubt about
whether or not his client had committed the crime with
which he was charged. Taking the point further, the lawyer
said that to substantiate his argument, if the jury turned
around and looked at the door behind them, within 30
seconds the alleged victim would walk into the courtroom.
The entire jury and all others in the courtroom turned
around to face the door. After approximately 1 minute the
jury turned back to face the lawyer.
The lawyer was standing with a smug look on his face. He
said to the jury that he had just proved his point. If there
was no doubt the jury would not have looked at the door to
see if the alleged victim would walk into the courtroom and
on this basis the jury had to find his client not guilty.
The jury retired and returned after one minute. The foreman
of the jury stood up and pronounced the verdict –
GUILTY of murder.
The lawyer was shattered. When the proceedings were
adjourned he approached the foreman of the jury and said
that there must have been some doubt -- everybody in the
courtroom turned around to look at the door. The foreman
of the jury smiled and said "everybody turned around except
your client!"
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