- People made unemployed by the coronavirus may need to retrain to access high-skill jobs
- More measures may be needed to encourage further education
- Tax reform is needed to support what may be a permanent shift to flexible and remote working
By Susan Franks, Senior Tax Advocate, Chartered Accountants Australia and New Zealand
The COVID-19 pandemic has generated significant unemployment. When the social restrictions are lifted, the Australian Government will expect businesses, particularly those that went into hibernation, to resume employing people.
But what if those businesses cannot just resume normal operations? If there is a permanent shift to online retail, for example, there will be less need for shop assistants.
How can people make the transition from this structural unemployment into jobs? Many will need to retrain.
The Prime Minister, Scott Morrison, has indicated changes to the Vocational Education and Training (VET) system. The government has also announced A$7 million to subsidise 1015 places in courses as diverse as teaching, agriculture, health, science, engineering, clinical psychology, information technology and languages, offered mainly by private education providers.
The need for people to retrain or upskill extends beyond VET. Many of the high-skill employment opportunities that sustain Australia’s relatively high wage levels require a university education.
The Higher Education Contribution Scheme (HECS) has been operating since 1989. A recent report from the Organisation for Economic Co-operation and Development (OECD) states that “private sources account for 60% of the total funding of tertiary educational institutions in Australia, almost double the OECD average”. If Australia wants a smarter, more flexible workforce, then HECS and how we fund universities is due for a review.
Other ways to encourage further education, retraining and upskilling include:
- Extending the COVID-19 apprenticeship wage subsidy scheme.
- Amending the income tax and fringe benefits tax (FBT) rules to encourage employer scholarships and/or fee reimbursements for full-time undergraduate recruits. This should be accompanied by changes to the Fair Work legislation to enable employers to recoup their investment should an employee resign within a certain timeframe.
- Offering a deduction to employers that subsidise postgraduate study for employees who are taking subjects relevant to the employer’s business. This incentive could be targeted at key sectors, for example, science and technology.
Social distancing rules may mean workers will have difficulties commuting, so flexible start and finish times and remote working are likely to be necessary for a while yet. The stress of a long, congested drive combined with the high cost of parking would not be acceptable to many employees.
These post-pandemic challenges will provide employers with the opportunity to reshape their work practices. Employers that adapt well will gain access to a diverse employee base.
These post-pandemic challenges will provide employers with the opportunity to reshape their work practices. Those employers that adapt well will gain access to a diverse employee base.
To support this transition, the FBT legislation needs to be more flexible. There are several existing FBT exemptions that apply only if the benefit is provided on the premises, such as in an office or factory. For example, the childcare exemption is only available only if the facility is “on business premises”. A review of the FBT law is needed to acknowledge that, for many employees in a post-pandemic world, the home has become the workplace.
The federal government may also need to reconsider how employees can claim working-from-home expenses. The current concessionary 80 cents per hour, which does not require a separate home office space, operates for the limited period of 1 March 2020 to 30 June 2020. This concession may need to become a permanent feature of the tax system. The Australian Taxation Office will be analysing 2020 deductions claims closely.
Indeed, just when the economy needs to encourage people to open their wallets, the latest ATO Individuals’ Tax Gap Report shows that incorrectly claimed work-related deductions amounted to A$4 billion.
We would expect work-related deductions to be considered in the process of clawing back some of the federal government’s COVID-19 largesse.
The COVID-19 apprenticeship wage subsidy scheme
As part of its Economic Response to the Coronavirus, the Australian Government is supporting business to manage cash flow challenges and to keep apprentices and trainees employed through a new Supporting Apprentices and Trainees wage subsidy.Find out more
ATO Individuals’ Tax Gap Report
Current gap estimate for individuals not in business is based on findings from three years of our random enquiry program, allowing us to begin analysing trends.Find out more