[vc_row][vc_column][vc_column_text]In a bid to encourage employers to provide retraining and reskilling for employees that have been made redundant, the government is proposing to exempt such courses from FBT. Currently, only very limited “work-related counselling” and outplacement services are not subject to FBT. In certain circumstances, FBT could almost double the cost of retraining courses that employers provide to their former employees, by making these courses exempt it is hoped that the Australian economy benefits by having less unemployment and more people working in booming industries.
With the work world changing at a rapid pace, aided perhaps by the COVID-19 pandemic, many people have found that the security of their job is no longer a certain. This along with many others in industries hardest hit by the pandemic seeking to either upgrade their skills or to re-train in a different field has spurred the government to propose new FBT changes to reskilling of employees that have been made redundant.
Currently, only “work-related counselling” services are exempt from FBT. This includes outplacement services provided to current and former employees that consist of guidance on seeking new employment, assistance in writing resumes/job applications, training for employment interviews/selection tests, and providing ancillary services (eg use of employer’s telephone or office space).
However, if the employer provides payment or reimbursement for the cost of a training course or an activity provided under a worker retraining program as a part of an employee being made redundant, it is not considered to be work-related counselling. As such, the employer is liable to FBT for the full cost of the program less any employee contributions. Depending on how the benefit is provided, FBT imposed in some cases would almost double the cost of a reskilling course for employers.[/vc_column_text][mk_blockquote font_family=”none”]By making retraining and reskilling redundant or soon to be redundant employees FBT exempt, the proposed new law would encourage more employers to provide those opportunities so that their former employees are better prepared to their next job or career, and the Australian economy benefits from having less unemployment.[/mk_blockquote][vc_column_text]Under the proposed new law, a benefit will be exempt if it satisfies the following conditions:[/vc_column_text][vc_column_text]
- the benefit is provided in, or in respect of, the tax year in respect of education or training undertaken by an employee of an employer;
- the employee is redundant;
- the employer has complied with any obligations under the Fair Work Act 2009 that applies in relation to the redundancy (ie any requirements to consult about the redundancy or, if the employee has been dismissed, any obligations regarding the dismissal); and
- the education or training is for the primary purpose of enabling the employee to gain or produce salary or wages in respect of any employment to which the education or training relates.
[/vc_column_text][vc_column_text]According to the government, the expenses associated with obtaining education or training includes both the cost of the training and/or related materials such as textbooks. In addition, to receive the exemption there must also be a close nexus between the education or training course provided and the expected employment the employee is planning to pursue.
It should also be noted that some benefits are excluded from the proposed exemption, and will continue to be subject to FBT under existing law (eg benefits provided under a salary packaging arrangement etc). The exemption is proposed to apply to eligible benefits provided on or after 2 October 2020, but note this proposal has not yet been introduced into Parliament.[/vc_column_text][vc_column_text]Want to help your staff retrain?
If your business would like to help redundant staff retrain without the extra FBT costs, contact us today, we will keep you updated with the progress of this measure, which will likely be updated at Budget time.[/vc_column_text][/vc_column][/vc_row]
