I inquired with the Department of Employment and Workplace Relations (DEWR) about the breach of Section 83 of the Constitution mentioned in their Annual Report regarding improper payments received by Coal LSL. This issue was not noted in the Coal LSL Annual Report for 2022-2023.
DEWR identified the breach in April 2023. It was discovered that several entities had paid levies to Coal LSL that should not have been paid. The funds were then paid to DEWR and deposited into consolidated revenue, where they were subsequently pooled and returned to Coal LSL from that revenue.
DEWR acted diligently to identify the error, highlighting the loose manner in which Coal LSL manages other people’s money.
Transcript
Senator ROBERTS: Thank you all for being here today. Here we go again. My questions are very short. They involve Coal LSL or your interaction with Coal LSL. Is it true that the Coal LSL annual report for 2022-23
states that no compliance issues were reported to the minister?
Senator Watt: I know Coal LSL will be appearing later tonight. I’ll just check whether we’re in a position to answer those questions now, or whether we might need to deal with them later.
Mr Manning: We’re just waiting for one of our colleagues to come from the waiting room downstairs. I don’t know the answer in relation to the annual report and any qualifications completely, but as I understand it there were none in relation to section 83 of the Constitution.
Senator ROBERTS: Thank you. I’d now like to take you to page 101 of the Department of Employment and Workplace Relations Annual Report 2022-23, which says: Coal LSL has identified it may have mistakenly received levy payments from entities that do not meet the definition of ’employer’ for the purposes of the Coal Mining Industry (Long Service Leave) Administration Act 1992. If so, payment of amounts equivalent to the levy by the department to Coal LSL in relation to those entities would likely have been made in contravention of s 83 of the Constitution.
Mr Manning: Yes, and that was the point I was getting to. Because of the way the money is collected under that scheme, a levy that’s collected is done by Coal LSL acting as an agent of the Commonwealth—because only the Commonwealth can levy taxation—and then goes into consolidated revenue. Then the same amounts go back out to allow Coal LSL, no longer acting as agent of the Commonwealth, to pay money for the purposes for which it exists. In the circumstances of section 83, it would technically be the Commonwealth, as represented by the Department of Employment and Workplace Relations, who, if there is a breach, has committed that breach. That’s why it’s in our annual report.
Senator ROBERTS: I guess I’m concerned because—what you’ve said in your report is accurate, I presume: Coal LSL has identified it may have mistakenly received levy payments from entities that do not meet the definition of ’employer’ … So they shouldn’t have taken that money.
Mr Manning: My understanding is there is a small number of employers who are not national system employers from whom the levy shouldn’t have been collected.
Senator ROBERTS: The report says: Coal LSL has assured the department that it is conducting further investigations to confirm how many entities may have incorrectly paid levy and quantify any corresponding amounts that have been paid by the Commonwealth without a valid appropriation. It looks like the money has been collected from individual entities by Coal LSL, sent to you and then it has gone back as a lump sum. Is it true that you have confirmed that the information relating to Coal LSL in your annual report is correct?
Mr Manning: That’s our understanding. I might just ask my colleagues, who have now been able to join us, if they have anything to add to that. As I understand it, the issues are still being worked through between the
department and Coal LSL.
Mr Kerr: What my colleague Mr Manning has said is correct. Our understanding is that Coal LSL may have mistakenly received levy payments from employers who do not meet the definition of ’employer’ under the
scheme. Mr Manning has correctly described the money flows—essentially, the amounts collected by Coal LSL flow in and out of the consolidated revenue fund in the department. That’s the standard approach for taxation revenues that all go in to CRF. As a result, that’s led to a section 83 breach that we have disclosed in our annual report. So all of that’s correct.
Senator ROBERTS: I find Mr Manning is usually pretty correct.
Mr Kerr: Indeed.
Mr Manning: Thank you; I’m always appreciative of the confirmation that I’ve got it right.
Senator ROBERTS: You weren’t even nervous while he was saying it. You weren’t waiting on the edge of your seat. How did the department become aware of these serious issues when it was not identified in Coal LSL’s annual report?
Mr Kerr: I believe we became aware of it in the context of considering some legislative amendments to the scheme.
Senator ROBERTS: When was the breach first detected?
Mr Kerr: I believe it was in April 2023.
Senator ROBERTS: Who identified the likely breach of section 83 of the Constitution? Was it Coal LSL or DEWR?
Mr Kerr: No, it was the department.
Senator ROBERTS: What is the outcome so far of the investigation into this matter?
Mr Kerr: The department has been working with Coal LSL to seek to clarify the scope of the problem. I understand that Coal LSL has undertaken some assurance activities to review the current active registered
employers to identify affected entities, which is not an entirely straightforward endeavour.
Senator ROBERTS: Nothing much is straightforward in Coal LSL.
Mr Kerr: Indeed. As part of that review, Coal LSL has updated its records and introduced some new procedures to mitigate the risk of new ineligible employers being onboarded, and probably Coal LSL is best
placed to speak to that later.
Senator ROBERTS: We will be tonight.
Mr Kerr: From the department’s point of view, we’re working closely with Coal LSL and other relevant Commonwealth agencies to try and clarify the scope of the issue and settle a way forward to resolve it.
Senator ROBERTS: So you’re still clarifying the scope.
Mr Kerr: That’s correct.
Senator ROBERTS: How was it detected? You said it was while doing some legislative enhancements.
Mr Kerr: Yes. The department was considering some potential legislative amendments to the scheme.
Senator ROBERTS: To the Coal LSL legislation?
Mr Kerr: Yes, correct.
Senator ROBERTS: In what year?
Mr Kerr: In 2023. In the course of that, we were considering the operation of the scheme and uncovered this issue.
Senator ROBERTS: Thank you for your diligence. What checks and balances does the department have in place to confirm that the payroll levy taxes collected are true and correct?
Mr Kerr: The department has obtained legal advice in relation to this matter, but to a large degree we rely on the information provided by Coal LSL with respect to the amounts of levy collected. As we are required to do under section 36 of the Coal Administration Act, the Commonwealth role here is really to withdraw amounts equivalent to the levy collected by Coal LSL out of CRF and pay it back to them, with the effect being that the amount collected ultimately ends up in the Coal LSL fund. So, from the department’s point of view, we rely quite heavily on the information provided by Coal LSL about those amounts.
Senator ROBERTS: What is DEWR doing to remedy this breach? I know you said that you rely a lot on Coal LSL; I understand that.
Mr Kerr: The consequences of a section 83 breach are dealt with in some guidance put out by the Department of Finance. Essentially, what an entity is required to do if concerned that an appropriation may have been spent in breach of section 83 is to conduct an appropriate risk assessment which may include legal advice, which we have done, and also to undertake a section 83 breach disclosure, which we’ve also done in the annual report that you just referred to.
Senator ROBERTS: There’s not much you can do in regard to prevent it happening again.
Mr Kerr: I think I’d say that we’re working closely with Coal LSL and other Commonwealth agencies, including the Department of Finance, to confirm which employers and employees have been affected and the
options for addressing these.
Senator ROBERTS: Minister, I’m asking for an opinion now. Was this disaster another example of Coal LSL’s incompetent best or an indication of the loose way that Coal LSL uses other people’s entitlements, and that
has not started since Labor came into office; that’s preceding Labor coming into office. I’m heartened by what Mr Manning and Mr Kerr said.
Senator Watt: Technically, we can’t give opinions but—
Senator ROBERTS: Ministers can. That’s why I asked the minister.
Senator Watt: Me, have opinions? Look, we support the work of the Coal LSL agency. Obviously, the department is taking you through a range of issues that are being considered and we’re supportive of that work as
well.
Senator ROBERTS: It seems DEWR has done its due diligence and done the job. I’m very concerned because—Coal LSL, at its core—the key issue we exposed in 2019. It took a long time for the government to say,
‘Okay, we finally agree with you.’ It took a lot of things to come out and I’m not sure it’s been fixed yet. Thank you, Chair.
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