Appropriation Arrangements for Employee Compensation Payments. Archived

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1 Australian Government Finance Circular No. 2006/10 To all FMA Act agencies Appropriation Arrangements for Employee Compensation Payments Purpose This Finance Circular sets out the appropriation arrangements for agencies subject to the Financial Management and Accountability Act 1997 (FMA Act) (FMA Act agencies) in relation to workers compensation benefits payable by Comcare. The arrangements have been revised to help allow a seamless transition for FMA Act agency employees between the payment of salary (including paid leave) and the payment of workers compensation. Target Audience This Finance Circular is relevant to FMA Act agency Chief Financial Officers and other employees responsible for the management of appropriations or Comcare payments. Overview 1. The Safety, Rehabilitation and Compensation Act 1988 (SRC Act) sets out, amongst other things, the appropriation arrangements for workers compensation benefits payable by Comcare Under the SRC Act, Comcare has the obligation to pay workers compensation benefits (including income replacement payments for periods of incapacity for work) to entitled employees. However, in practice, where there is an ongoing employer-employee relationship, it may be more efficient for Comcare to make a payment to an employer (including an FMA Act agency) and for the employer to make payments to an employee. 3. When an employee of an FMA Act agency makes a claim for compensation, consideration should be given to whether it will be administratively efficient, effective and ethical, and consistent with the employee s entitlements, for the employee to be granted paid leave until the employee's claim is determined. Where an employee is not granted paid leave (and does not receive salary etc), pending determination of a claim by Comcare, any amount subsequently received from Comcare by the FMA Act agency in relation to the claim is public money held for the benefit of the employee (see paragraphs 18-20). 4. Under the SRC Act, an FMA Act agency is legally authorised to continue to pay an employee salary etc (including paid leave), pending determination of a claim by Comcare. Where a claim is determined in favour of an employee, and Comcare is liable to pay an amount of compensation under Division 3 of Part 2 of the SRC Act, section 112A of the SRC Act allows Comcare to elect to make the payment either directly to an employee (see paragraph 5) or to an employer (including an FMA Act agency) (see paragraph 7). 1 The SRC Act was amended on 1 July 2006 through the Financial Framework Legislation Amendment Act Transitional arrangements are set out in the Attachment to this Circular.

2 Compensation amounts paid by Comcare directly to an employee 5. In some circumstances, Comcare may elect to pay compensation directly to an employee. In such cases, for injuries that occur after 1 July 2006, paragraph 23A(3)(a) of the SRC Act requires Comcare to set off amounts (including salary etc) paid by an employer to an employee, pending determination of a claim, against the compensation payable to the employee. 6. Where Comcare makes such a set off, subsection 23A(5) of the SRC Act requires Comcare to pay an amount, equal to the amount it sets off, to the employer. Such a payment is regarded as a repayment for the purposes of section 30 of the FMA Act (see paragraph 8(c) for an explanation of the set off, and paragraph 10 for an explanation of section 30). Compensation amounts paid by Comcare to an FMA Act agency 7. Where Comcare elects to make a payment to an FMA Act agency, Comcare is required to advise the FMA Act agency before doing so. After being advised by Comcare, the agency may either: (a) before the agency receives the payment from Comcare: pay the balance of the amount Comcare has determined the employee is entitled to, after setting off any salary etc (including paid leave) paid to the employee by the FMA Act agency, pending determination of a claim by Comcare (called an anticipatory payment) (see paragraphs 14-17); or (b) after the agency receives the payment from Comcare: set the amount off against salary etc (including paid leave), if any, paid to the employee, pending determination of the claim, and hold the balance for the benefit of an employee, until it is paid to the employee (see paragraphs 18-20). Application of section 30 of the FMA Act 8. An amount paid by Comcare to an FMA Act agency is taken to be a repayment, for the purposes of section 30 of the FMA Act, to the extent that the amount: (a) is set off by the FMA Act agency against amounts of salary etc (including paid leave) paid to an employee prior to determination of the claim by Comcare (see paragraphs 11-13); (b) is received by the FMA Act agency, after the FMA Act agency has made an anticipatory payment (see paragraphs 14-17); or (c) represents an amount set off by Comcare, against salary etc paid to the employee, by the FMA Act agency, prior to determination of the employee s claim. This would usually occur where Comcare has elected to pay compensation directly to an employee (see paragraph 5). 9. Where an agency has made a payment, and the amount (or part of it) is subsequently paid back to the agency, section 30 of the FMA Act operates to reinstate the appropriation relied on to make the original payment. This allows the amount to be paid out again (subject to any time or other limits that apply to the appropriation). 10. The effect of section 30 of the FMA Act is that the gross amount paid by Comcare to an agency is re-credited to the appropriation against which the salary, leave or compensation payments were originally debited. This will ordinarily be an FMA Act agency s departmental appropriation. 2 2 The appropriation relied on to make the original payment of the amount repaid will be available to support a further payment, subject to any conditions that apply to the appropriation. See the relevant Finance Circular (Section 30 of the FMA Act - Reinstatement of appropriations for amounts repaid, available at for further information.

3 Arrangement applicable where an employer makes payments to an employee prior to Comcare determining a claim 11. Where Comcare determines that the employee is entitled to compensation in relation to an injury that occurred on or after 1 July 2006, subsections 23A(2) and (3) of the SRC Act provides a mechanism under which salary etc paid to the employee (by the FMA Act agency), pending the determination, must be set off against the amount of compensation payable by Comcare. 12. If Comcare elects to pay compensation directly to the employee, Comcare is required to set off salary etc previously paid and to arrange for the amount set off to be repaid to the FMA Act agency (see paragraph 5). If Comcare elects to make the compensation payment to the FMA Act agency, the FMA Act agency will be responsible for setting off salary etc previously paid against either an anticipatory payment or against an amount received from Comcare (see paragraph 7). 13. Under subsection 23A(8) of the SRC Act, if the amount paid to the employee (including salary etc), pending the determination of the employee s claim, exceeds the amount of compensation payable to the employee, the excess is recoverable as a debt due to the Commonwealth. SRC Act Anticipatory payments 14. Where Comcare makes a determination in favour of an FMA Act agency employee, and advises an FMA Act agency of its intention to make a payment to the FMA Act agency, the FMA Act agency may make an anticipatory payment to the employee before receiving the payment from Comcare. 15. Subsection 112A(4) of the SRC Act provides that an anticipatory payment is made subject to the operation of section 23A of the SRC Act. The effect of section 23A is that salary etc paid to the employee (by the FMA Act agency), pending the determination of the claim by Comcare, must be set off against the amount of the anticipatory payment made by the agency. 16. Paragraph 112A(6)(a) of the SRC Act provides that the appropriation authority relied on to make payments of salary or wages to the employee, prior to the determination of a Comcare claim, may also be relied on to make an anticipatory payment, following determination of a claim. This will ordinarily be an FMA Act agency s departmental appropriation. 17. The appropriation arrangements described in paragraphs 8-10 apply where the FMA Act agency receives an amount from Comcare corresponding to a payment, including a payment of salary etc (including paid leave), the employer has made. That is, once the FMA Act agency receives the corresponding payment from Comcare, the payment is a repayment for the purposes of section 30 of the FMA Act. Appropriation arrangements for Comcare amounts, held by an FMA Act agency for the benefit of an employee 18. Where an FMA Act agency holds an amount: (a) relating to an injury which occurred on or after 1 July 2006, being the balance of a payment from Comcare remaining after amounts for salary, leave and compensation already paid to the employee (if any) have been set off under section 23A of the SRC Act; or (b) relating to an injury which occurred prior to 1 July 2006 (to which section 23A does not apply), being the whole of a payment from Comcare, 3 this amount is public money held by the FMA Act agency for the benefit of the employee. 3 Section 23A of the SRC Act, which allows for set off of compensation payable against amounts already paid, does not apply to payments made by Comcare in relation to injuries that occurred prior to 1 July In these cases, FMA Act agencies should continue to credit amounts received from Comcare to their Other Trust Moneys (OTM) Special Accounts. Consent, from the relevant employee, should be obtained prior to the FMA Act agency using an amount received from Comcare to reimburse itself for amounts paid to the employee, pending determination of a claim (see paragraphs 18-20).

4 19. Such an amount should be credited to the FMA Act agency s Other Trust Moneys (OTM) Special Account pending payment to the employee. An OTM Special Account is a Special Account established by the Finance Minister under subsection 20(1) of the FMA Act for the purpose of expenditure of moneys temporarily held on trust, or otherwise, for the benefit of a person other than the Commonwealth Subsection 20(4) of the FMA Act appropriates the Consolidated Revenue Fund for expenditure for the purposes of a Special Account established by the Finance Minister under subsection 20(1) of the FMA Act, including an FMA Act agency s OTM Special Account. 21. An FMA Act agency that holds the balance of a Comcare amount payable to an employee, but does not have an OTM Special Account, should consider whether it has an appropriation authority to make the payment. Where no appropriation authority exists, the FMA Act agency should contact Finance regarding the establishment of an OTM Special Account (noting that there is a formal process for establishing Special Accounts, and this process may take some time to complete). Contacts 22. If you have any queries regarding the appropriation arrangement set out in this circular, please contact Financial Framework Policy Branch at finframework@finance.gov.au 23. If you have any queries in relation to implementation matters and practical guidance about the operation of the SRC Act, other than for matters concerning appropriation arrangements, please contact the Comcare Operational Policy Helpdesk by at or by telephone on (02) Marc Mowbray d Arbela Acting First Assistant Secretary Financial Framework Division Financial Management Group 24 November For detailed guidance on OTM Special Accounts, see Financial Management Guidance No. 7, Guidelines for the Management of Special Accounts, published in October 2003 and available at

5 ATTACHMENT to Finance Circular 2006/10 Transitional Arrangements 1. FMA Act agencies have typically credited payments from Comcare to their OTM Special Account and, after obtaining a written authority from the relevant employee, used the Comcare money to repay amounts paid by the FMA Act agency, pending determination of a claim. This practice should continue for all payments received from Comcare in relation to compensation for injuries occurring prior to 1 July In the past, some FMA Act agencies credited Comcare payments to their Services for Other Government and Non-Agency Bodies Special Accounts (SOG Special Accounts). This practice should be avoided in future. Where an FMA Act agency has credited an amount equivalent to an amount received from Comcare to its SOG Special Account, with the intention of reimbursing itself for salary etc paid to an employee, pending determination of a claim, the FMA Act agency should ensure that it has clear instructions from the entitled employee before making the reimbursement. 3. The written authority or instructions given by an employee should acknowledge that Comcare has an obligation to make a payment to the employee, that the employee owes a debt to the Commonwealth and that the employee directs the FMA Act agency to apply money that it has received from Comcare (and now holds for the benefit of the employee) to discharge the employee s debt. 4. Where an FMA Act agency is unable to obtain the consent of an employee, to reimburse itself with an amount the FMA Act agency has received from Comcare (and has credited to its SOG Special Account), the agency should contact Financial Framework Policy Branch at Finance prior to making any reimbursement.