Although not strictly a tax issue, the new Queensland Labour Hire Licensing Regime was introduced on Monday 16 April, 2018 without much fanfare.
Following is a "brief" overview of the new system and a call to action.
What is the legislation about?
In general terms, the new Act requires any entity that provides labour hire services to another entity to be licensed, unless an exemption applies.
It is understood that the legislation has been introduced to combat a recent high profile "Phoenix" case which resulted in a labour hire structure being collapsed without paying the Taxation Office all monies it was due.
Does this apply to me?
The definitions of 'labour hire services' and 'worker' in the Act are very broad.
The Act defines 'labour hire services' as follows:
A person (a provider) provides labour hire services if, in the course of carrying on a business, the person supplies, to another person, a worker to do work.
The Act defines 'worker' as follows:
An individual who enters into an arrangement with a provider under which the provider may supply, to another person, the individual to do the work, and the provider is obliged to pay the worker, in whole or part, for the work.
Example 1: You will be caught by the legislation in the following circumstances:
Your business is operated by ABC Pty Ltd. Your employees are employed through a separate company XYZ Pty Ltd. XYZ Pty Ltd provides the employees for use in the business of ABC Pty Ltd.
Example 2: You will not be caught by the legislation in the following circumstances:
Your business is operated by ABC Pty Ltd. Your employees are employed by ABC Pty Ltd.
Note: This email is about a new regime for Labour Hire in Queensland. Similar legislation is currently being implemented in other States and Territories. If you would like us to consider your specific circumstances, then please let us know.
This cannot be right, isn't there an exemption?
There is a possible exclusion under the internal labour hire category. The Act says:
An individual whom a provider supplies to another person to do work if the provider and the other person are each part of an entity or group of entities that carry on business collectively as one recognisable business.
Providers will need to carefully scrutinize their arrangements to determine whether they fall within the scope of the exclusion.
So what happens if the provisions of the Labour Hire Licensing Act 2017 (Qld) apply?
Existing labour hire service providers have until Friday 15 June 2018 to lodge an application for a license.
The filing fee for making an application depends on the level of wages paid or projected. For a tier 1 business with wages under $1.5 million the fee is $1,000.
Are there any penalties that can apply?
If a business is found to have engaged the services of a labour hire provider without a license, they may be fined a maximum penalty of approximately $378,450 for a company or approximately $130,440 or three years imprisonment (for individuals).
What needs to be done?
The deadline for the application is Friday 15 June 2018.
One option is for you to simply self-assess and work out whether you need to lodge an application or not.
Given the penalties involved, you may prefer to obtain external advice. We have negotiated with a law firm familiar with the legislation to provide legal advice as to whether the Act applies and if so whether an exemption is available. The cost for the advice is expected to be around $2,000 plus GST but will vary depending on the complexity of the structure.
If you have any questions in relation to the Labour Hire Licensing Act 2017 (Qld) then please contact either Peter Rule or Chris Burns on 07 5439 1600.