As a business owner in Australia, staying ahead of regulatory changes is crucial for your success. One significant shift on the horizon is the introduction of Payday Superannuation, set to take effect from July 1, 2026.

This blog post will explain what this means for you and how you can prepare your business for this important transition.

What is Payday Superannuation?

In essence, Payday Superannuation requires employers to pay their employees’ superannuation guarantee (SG) contributions simultaneously with their salary and wages. This represents a major change from the current quarterly payment system and aims to ensure more timely and accurate superannuation payments for Australian workers.

Key changes you need to know

1. Tighter Payment Deadlines:
   • Employers will have just 7 days from payday to ensure SG contributions reach employees’ superannuation funds.
   • This applies each time you pay ordinary time earnings (OTE) to an employee.
2. Updated Super Guarantee Charge (SGC):
   • If you miss the 7-day window, you’ll be liable for an updated SGC.
   • The new SGC structure includes the outstanding SG shortfall, notional earnings, and an administrative uplift.
   • Good news: The SGC will become tax-deductible, aligning the tax treatment with regular super contributions.
3. Small Business Superannuation Clearing House (SBSCH) Retirement:
   • The SBSCH will be decommissioned from July 1, 2026.
   • Small businesses will need to transition to commercial alternatives for super payments.
4. SuperStream Improvements:
   • Super funds will have just 3 business days (down from 20) to allocate or return contributions.
   • Expect enhanced error messaging to help quickly resolve any issues.
5. Single Touch Payroll (STP) Updates:
   • You’ll need to report both OTE and total super liability for each employee through STP.

How can you prepare?

1. Review Your Payroll Process: Start assessing your current payroll systems. Can they handle more frequent super payments? If not, it might be time to upgrade.
2. Educate Your Team: Ensure your payroll and finance staff are aware of these upcoming changes and understand the new requirements.
3. Budget for Potential Cash Flow Changes: Moving from quarterly to payday super payments may impact your cash flow. Start planning now to smooth the transition.
4. Explore New Super Payment Solutions: With the SBSCH being retired, research alternative platforms that can efficiently manage your super obligations.
5. Stay Informed: Keep an eye out for further updates from the Treasury and ATO as they engage with stakeholders on these changes.

While Payday Superannuation represents a significant shift in how we manage employee benefits, it also offers opportunities. By streamlining super payments, you can potentially reduce administrative burden in the long run and contribute to a more secure financial future for your employees.

Remember, being proactive is key. Start preparing now, and you’ll be well-positioned to navigate this change smoothly when 2026 rolls around. As always, consider consulting with our financial adviser or accountant for personalised guidance on how these changes will affect your specific business situation.

Contact our KMT advisers for tax advice before extracting wealth from your company.

About our advisers: 

Michael Fox has been dedicated to his clients’ success, devising comprehensive wealth strategies for personal and business growth for over four decades. With extensive expertise in business governance and family business succession, Michael specialises in empowering emerging businesses and family enterprises by fostering renewal, enhancing value, and smoothing transitions to the next generation. Please do not hesitate to reach out if you need assistance.

Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.

Employee benefit arrangements have recently come under increased scrutiny from the ATO. This article aims to provide a comprehensive overview of these arrangements, their potential tax implications, and key considerations for both employers and employees.

Types of employee benefit arrangements

The ATO has identified several types of employee benefit arrangements that may be designed to avoid tax. These include:

1. Employee bonus arrangements
2. Employee share trusts
3. Employee investment trust/plans
4. Employee incentive trust/plans
5. Employee savings plans
6. Employee entitlement funds
7. Employee reward schemes

It’s important to note that these arrangements do not include complying employee share schemes and approved worker entitlement funds.

Common structures

1. Employee benefit trust arrangements

These typically involve:

• An employer establishing an employee benefit trust
• Employees directing salary to be paid into the trust
• The trust investing contributions on behalf of employees
• Selected employees acquiring an interest in the trust

These arrangements are often structured to provide tax deductions for the employer while avoiding Fringe Benefits Tax (FBT) liabilities.

2. Employee share or incentive plans

Key characteristics include:

• Establishment of a special purpose company by the employer
• Allocation of shares or membership interests to selected employees
• Employer contributions to the special purpose company
• Investment of contributions, often through loans back to the employer

While designed as employee incentive plans, participation is often limited to business controllers.

3. Employee remuneration trusts (ERTs)

ERTs are established to provide remuneration or incentives to Australian resident employees. They involve:

• Trust establishment by the employer or an adviser
• Trustee receiving money or assets from the employer
• Provision of benefits to employees or their associates

Tax implications

For employers:

• Contributions to ERTs may be deductible if genuinely intended for employee remuneration
• Pay As You Go (PAYG) withholding may be required on certain contributions
• FBT can apply to contributions, benefits, and loans provided through ERTs
• Ongoing maintenance fees for ERTs may be deductible

For employees:

• Benefits received from an ERT may be assessable income if considered remuneration
• Contributions made to an ERT on an employee’s behalf may be assessable income

ATO concerns

The ATO is particularly concerned about arrangements designed to:

1. Defer or avoid tax on employer profits
2. Provide large tax deductions for employers
3. Avoid FBT liabilities

Key considerations

1. Employers should carefully evaluate the tax implications of any employee benefit arrangement before implementation.
2. Employees should be aware of the potential tax consequences of participating in such arrangements.
3. Both parties should consider seeking professional tax advice to ensure compliance with current regulations.

While employee benefit arrangements can serve legitimate purposes, it’s crucial to navigate them with caution. The ATO’s increased focus on these structures underscores the importance of thorough due diligence and professional guidance when considering their implementation.

For further information or specific advice regarding employee benefit arrangements, it is recommended to consult with a qualified tax professional or refer to the latest ATO guidelines.

Contact our KMT advisers for tax advice before extracting wealth from your company.

About our advisers: 

Michael Fox has been dedicated to his clients’ success, devising comprehensive wealth strategies for personal and business growth for over four decades. With extensive expertise in business governance and family business succession, Michael specialises in empowering emerging businesses and family enterprises by fostering renewal, enhancing value, and smoothing transitions to the next generation. Please do not hesitate to reach out if you need assistance.

Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.

Do you operate your business through a private company? Well, arrangements that extract wealth from private companies, while avoiding the appropriate amount of tax, are on the ATO’s radar.

Transactions that attract its attention include those that:

• Are conducted through one or more interposed entities; and/or
• Involve excessive or non-arm’s length payments.

To target areas of concern, the ATO continues to improve data matching processes across a range of sources to identify entities that received income or other benefits but haven’t reported it and may have a tax liability.

These areas of focus may include:

• Director loans;
• Dividend access share schemes;
• Deemed dividends;
• Unpaid present entitlements.

The anti-avoidance rules may also apply to such arrangements.

Director loans

The ATO focuses on:

• Directors who are shareholders of private companies and who report low levels of salary and wages with minimal other sources of income;
• Whether shareholders and their associates are maintaining a lifestyle that cannot be supported by the level of income reported to the ATO.

Dividend access share schemes

Situations that attract the ATO’s attention include:

• Using dividend access shares as part of a scheme to enable dividend stripping;
• Arrangements that involve the use of ‘dividend access shares’ to distribute accumulated profits of a company in a tax-free (or lower tax) form to an associate of the ordinary shareholders of the company.

The ATO encourages taxpayers to review their affairs if they have entered into such arrangements.

Deemed dividends

A deemed dividend (under Division 7A) may arise where a payment or other benefit is provided by a private company to a shareholder or their associate.

The payment or benefit provided can be treated as a dividend for income tax purposes even if the participants treat it as some other form of transaction, such as a loan, advance, gift or writing off a debt. The deemed dividend is included in the assessable income of the shareholder or their associate.

The ATO’s attention is attracted when:

• Amounts are taken from a company and not repaid;
• A complying loan agreement has not been put in place;
• Minimum yearly repayments on a loan are not paid;
• Income from interest on a loan is not declared;
• Company funds or assets are used for private purposes;
• Transactions occur through interposed entities which appear to be an arrangement involving a payment or loan from the company to a shareholder or their associate;
• Money has been borrowed directly or indirectly, from a company to repay an existing loan, or make minimum yearly repayments on a complying loan, from the same company;
• Payments are made on an existing loan (either the full amount or minimum yearly repayments) and when the payments were made, the shareholder or their associate intended to, directly or indirectly, reborrow a similar or larger amount from that company;
• Arrangements appear to be designed to avoid the application of Division 7A or otherwise achieve an inappropriate tax advantage.

Unpaid present entitlements

An unpaid present entitlement (UPE) is where a private company is a beneficiary of a trust and is presently entitled to an amount of trust income but does not actually receive payment of that distribution.

Situations that attract the ATO’s attention include:

• Private companies, including assessable trust distributions, not receiving payment of the distribution from the trust before the earlier of the due date for lodgment and the date of lodgment of the trust’s tax return for the year in which the present entitlement arose;
• A failure to put funds retained by the trustee in a sub-trust for the sole benefit of the private company beneficiary;
• A failure to pay the UPE at the conclusion of the term specified in an investment agreement;
• Arrangements releasing the trustee from having to pay the UPE to the private company beneficiary.

Contact our KMT advisers for tax advice before extracting wealth from your company.

About our advisers: 

Michael Fox has been dedicated to his clients’ success, devising comprehensive wealth strategies for personal and business growth for over four decades. With extensive expertise in business governance and family business succession, Michael specialises in empowering emerging businesses and family enterprises by fostering renewal, enhancing value, and smoothing transitions to the next generation. Please do not hesitate to reach out if you need assistance.

Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.

With many parts of the Federal Government’s “Closing Loopholes” legislation coming into effect this financial year, it is important to be aware of the obligations you have as an employer.

The new “Right to Disconnect” rule was introduced for employees from 26 August 2024, applying if a business has 15 or more employees. For employers with less than 15 employees, the Right to Disconnect will take effect on 26 August 2025.

What is the “Right to Disconnect?”

The Fair Work Act 2009 (Cth) (“the Act”) will now give employees a positive right to refuse to monitor, read or respond to contact, or attempted contact, from their employer, or third parties related to work, if that contact is outside of the employee’s working hours, unless the refusal is found to be unreasonable.

What does this amendment mean for your business?

The “Right to Disconnect” will impact the way that your business communicates with its employees outside of work hours. Employees will be potentially able to make a General Protections claim if they are of the view that there has been an adverse action taken against them by their employer because of their “Right to Disconnect”.

When will a “Right to Disconnect” be unreasonable?

An employee’s ‘Right to Disconnect’ will be unreasonable if the contact or attempted contact is required by law. If there is no requirement at law for communication, the following factors are to be considered when deciding whether the employee’s disconnection is ‘unreasonable’:

• The reason for the contact or attempted contact,
• How the contact is made and the level of disruption the contact or attempted contact causes the employee,
• The extent to which the employee is compensated to remain available to perform work outside of their ordinary hours of work,
• The period in which the contact or attempted contact is made or is compensated for working additional hours outside of the employee’s ordinary hours of work,
• The nature of the employee’s role and the employee’s level of responsibility, and
• The employee’s personal circumstances, including family or caring responsibilities.

What are your obligations as an employer?

There is no prohibition on employers contacting their employees outside of hours of work, the right is on the employee to elect to ignore or not respond to the contact, outside of their work hours unless the refusal is found to be unreasonable. This right extends to contact from a third party if the contact, or attempted contact, relates to the employee and their work.

We recommend businesses create a specific policy detailing the manner in which they will communicate with their employees outside of work hours. This policy should be drafted by a specialist Employment Lawyer to ensure it appropriately addresses the legislative requirements.

Changes to casual employment

Rules about casual employment have changed, including how casual work is defined, pathways to permanent employment, and employee and employer responsibilities.

Definition of Casual Employee

A new definition of “casual employee” was introduced to the Fair Work Act. Under this definition, a person employed from 26 August 2024 will be casual employee if, when they start employment:

• The employment relationship has no firm advance commitment to ongoing work, taking into account a number of factors, and
• They’re entitled to a casual loading or specific casual pay rate under an award, registered agreement, or employment contract.

Employees classified as casual who were with their employer before 26 August 2024 will stay casual under the new definition unless they move to permanent employment.

Pathway to permanent employment

Casuals will have a new pathway to full-time or part-time (permanent) employment under the National Employment Standards. The ‘employee choice pathway’ will allow eligible casuals to notify their employer in writing of their intention to change to permanent employment. An employer can only refuse the notice for certain reasons. These rules replace the current rules for changing to permanent employment.

A casual will be able to provide written notice to their employer to change to permanent employment under the employee choice pathway if they:

• Have been employed for at least 6 months (12 months if employed by a small business)
• Believe they no longer meet the requirements of the casual employee definition.

Independent contractor changes

 A new definition of employment has been added to the Fair Work Act to help determine the meaning of ‘employee’ and ‘employer’. This is used by some businesses to work out whether a worker is an independent contractor (contractor) or an employee.

To work out if someone is a contractor or an employee, the following must be considered:

• The real substance, practical reality and true nature of the working relationship
• All parts of the working relationship between the parties. This includes the terms of the contract and how the contract is performed in practice.

Applying the new definition may:

• Mean that some working relationships are characterised differently
• Result in different rights and obligations for people affected.

The whole of relationship test

There is a different method of checking if a worker is a contractor or an employee, using the new definition of employment that applies from 26 August 2024. This new method is known as the whole of relationship test (note that this test does not apply to sole traders or partnerships who have employees).

The whole of relationship test determines if a worker is a contractor or an employee by considering the real substance, practical reality and true nature of the relationship.

If there is an employment relationship, the worker is an employee of the business. When considering the real substance, practical reality and true nature of the relationship, there are several factors to consider. These include:

• The amount of control over how work is performed
• Financial responsibility and risk
• Who supplies the tools and equipment
• Ability to delegate or subcontract work
• Hours of work
• Expectation of work continuing.

Contact our KMT advisers if you need tax assistance.

About our advisers: 

Michael Fox has been dedicated to his clients’ success, devising comprehensive wealth strategies for personal and business growth for over four decades. With extensive expertise in business governance and family business succession, Michael specialises in empowering emerging businesses and family enterprises by fostering renewal, enhancing value, and smoothing transitions to the next generation. Please do not hesitate to reach out if you need assistance.

Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.

The Tax Commissioner has successfully argued that more than $1.6m deposited in a couple’s bank account was assessable income, not a gift or a loan from friends.

When is a gift not a gift?

The case of Rusanova and Commissioner of Taxation is enough for a telemovie. The plot features an Australian resident Russian couple ‘gifted’ over $1.6m in unexplained bank deposits, over $67,000 in interest, the Russian father-in-law seafood exporter, a series of Australian companies, and the generous friend loaning money in $20,000 tranches.

The crux of the case before the Federal Court is whether you can prove to the ATO that unexplained deposits should be treated as gifts or loans and what happens when the Tax Commissioner thinks otherwise? If the Commissioner suspects the deposits are income, they can issue a default tax assessment and decide what tax should be paid. The burden of proof is then on the taxpayer to prove the Tax Commissioner wrong.

The unexplained deposits

Between 2012 and 2016, an Australian resident husband and wife had an estimated $1,636,000 deposited into their bank accounts. The ATO became curious when neither spouse had lodged tax returns in the mistaken belief that they had not earned any income.

The money deposited, they said, was a gift from the wife’s father and therefore not assessable income. Curiously, there were no records produced to support the deposits and not a single text or email notifying that money had been remitted, or acknowledging its receipt.

In addition, a friend of the couple deposited money into the husband’s account including a series of $20,000 transactions over about a week. These, the friend said, were interest-free loans with no agreed terms but an expectation that they would be repaid. The friend could not remember how he was requested to make the loans and there were no loan documents, emails, or texts disclosed to support the loans. Around the same time as the loans were being advanced, there was evidence of the husband ‘repaying’ amounts in excess of what had been lent. In addition, documents show the husband transferred a Porsche Cayenne to his friend in Russia, said to be repayment of the loan.

Compounding the issue were the four directorships of Australian companies held by the husband, none of which had lodged tax returns. One of the companies was a seafood wholesaler, distributing the product of his father-in-law’s American registered Russian export company. The dedicated son-in-law stated that he was merely trying to develop his father-in-law’s business during 2010 and 2016, without remuneration.

Contesting the Tax Commissioner

In 2017, a covert tax audit utilised entries in the couple’s bank accounts to assess their income tax liability and the ATO issued a default assessment based on the unexplained deposits and expenses. The couple objected to the assessment and this objection was partly allowed. A second assessment was then issued to which the couple again objected before the Administrative Appeals Tribunal (AAT) on the grounds that the assessment was excessive.

Can the Tax Commissioner really decide how much tax you should pay?

The Tax Commissioner has the power to issue a ‘default assessment’ for the amount they believes is owing from overdue tax returns or activity statements. The assessment is the amount the ATO believes is owing, not what has been declared.

The problem with a default assessment is not just the Tax Commissioner deciding how much tax you should pay, it is the potential addition of an administrative penalty of 75% of the tax-related liability for each default assessment issued. This penalty may be increased to 95% of the tax-related liability in certain circumstances for taxpayers who have a pattern of non-compliance.

But, here is the problem for the couple. While genuine gifts of money are not taxable, the burden is on the taxpayer to prove that the gift is truly a gift, if the ATO asks. The AAT held that, “absent any reliable evidence…, there is no proper basis to make any findings as to whether the deposits constitute part of the applicants’ taxable income or not.”

The Tax Commissioner can rely on a “deficiency of proof”.

The couple’s stance that the deposits were either gifts from the father or loans from a friend were rejected by the AAT. This is despite an affidavit and evidence from the wife’s father stating that the amounts transferred to them were gifts. The couple did not demonstrate what their income actually was to prove the Tax Commissioner’s assessment was unreasonable, and they could not substantiate that the gifts were indeed gifts from a very generous father.

The Federal Court dismissed the couple’s appeal with costs, leaving the Tax Commissioner’s default tax assessment and penalties in place.

Avoiding the gift tax trap

A gift of money or assets from an individual is generally not taxed if the gift is given voluntarily, nothing is expected in return, and the gift giver does not materially benefit.

However, there are some circumstances where tax might apply.

Gifts from a foreign trust

If you are a tax resident of Australia and the beneficiary of a foreign trust, it’s possible that at least some of the amounts paid to you (or applied for your benefit) will need to be declared in your tax return. This applies even if you were not the direct beneficiary of the foreign trust, for example, a family member received money from a foreign trust and then gifted it to you. This applies to cash, loans, land, shares, etc.

Inheritances

Money or property you inherit from a deceased estate is often not taxed. However, there are circumstances where capital gain tax (CGT) might apply when you dispose of an asset you inherited. For example, if you inherit your parents’ house, CGT generally does not apply if:

• The property was their main residence; and
• Your parents are Australian residents for tax purposes; and
• You sell the property within 2 years.

However, CGT is likely to apply if for example:

• You sell your parents’ former main residence more than 2 years after you inherit it; or
• The property you inherit was not your parents’ main residence; or
• Your parents were not Australian tax residents at the time of their death.

Managing the tax consequences of an inheritance can become complex quickly. Please contact us for assistance when planning your estate to maximise the outcome for your beneficiaries, or managing the tax implications of an inheritance. These issues are often not taken into account if you are drafting or updating a will.

Gifting an asset does not avoid tax

Donating or gifting an asset does not avoid CGT. If you receive nothing or less than the market value of the asset, the market value substitution rule might come into play. The market value substitution rule can treat you as having received the market value of the asset you donated or gifted when calculating any CGT liability.

For example, if Mum & Dad buy a block of land then eventually gift the block of land to their daughter, the ATO will look at the value of the land at the point they gifted it. If the market value of the land is higher than the amount that Mum & Dad paid for it, then this would normally trigger a CGT liability. It does not matter that Mum & Dad did not receive any money for the land. Mum & Dad might have a CGT bill for the land they gifted with nothing in return.

Donations of cryptocurrency might also trigger CGT. If you donate cryptocurrency to a charity, you are likely to be assessed on the market value of the crypto at the point you donated it. You can only claim a tax deduction for the donation if the charity is a deductible gift recipient and the charity is set up to accept cryptocurrency.

Contact our KMT advisers if you need tax assistance.

About our advisers: 

Michael Fox has been dedicated to his clients’ success, devising comprehensive wealth strategies for personal and business growth for over four decades. With extensive expertise in business governance and family business succession, Michael specialises in empowering emerging businesses and family enterprises by fostering renewal, enhancing value, and smoothing transitions to the next generation. Please do not hesitate to reach out if you need assistance.

Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.

Have you ever wondered about the true cost of workplace stress?

A recent report from Safe Work Australia paints a sobering picture of mental health in Australian workplaces. Mental health conditions account for an increasing proportion of serious workers’ compensation claims, and have garnered significant attention over recent years as awareness of their impact on individuals and workplaces has grown.

What are psychosocial hazards?

Psychosocial hazards are aspects of the work environment, work organisation, and social interactions at work that have the potential to cause psychological or social harm to employees. These hazards can lead to stress, burnout, and other mental health issues. Unlike physical hazards, which involve risks like machinery or hazardous substances, psychosocial hazards are related to how work is managed, the culture of the workplace, and the relationships between employees.

Some common examples of psychosocial hazards include workplace stress, unrealistic expectations, bullying and harassment, job insecurity, lack of support, role ambiguity or discrimination.

The rising tide of mental health claims

Did you know that 2 in 5 Australians had experienced a mental health condition at some point in their lifetime?

In 2020-22, the ABS National Study of Mental Health and Wellbeing reported that this was similar to the number of Australians who reported experiencing a mental health condition at some point in their lifetime in the 2007 study (45%).

Women were more likely than men to have experienced an anxiety or affective disorder in the past 12 months, while men were much more likely to have experienced a substance use disorder. In the same period, Australians aged 16-24 were most likely to report having experienced an anxiety, affective or substance use disorder.

Mental health conditions now account for nearly one in ten serious workers’ compensation claims. That’s a staggering 36.9% increase since 2016-17. But here’s the kicker – these claims aren’t just more frequent, they’re also more costly and time-consuming. On average, mental health claims result in four times more time off work and four times higher compensation payments compared to other injuries. It’s clear that workplace mental health is no longer an issue we can afford to ignore.

What’s causing the surge?

You might be wondering, “What’s behind this dramatic increase?” The report identifies three main culprits:

1. Work-related harassment/bullying (27.5%)
2. Work pressure (25.2%)
3. Workplace violence (16.4%)

These factors account for over two-thirds of all mental health claims. It’s a stark reminder that our workplaces can be breeding grounds for stress and anxiety if we’re not careful.

Who’s most at risk?

Interestingly, some industries and occupations bear a heavier burden than others.

Health care and social assistance, public administration and safety, and education and training top the list of industries with the highest number of mental health claims. If you’re a community service worker, a professional, or in an administrative role, you might be more likely to experience work-related mental health issues.

The gender gap

Here’s a thought-provoking statistic: women filed 58% of all mental health claims.

Why the disparity? It’s likely due to higher representation in at-risk industries and occupations. Women also reported more exposure to psychosocial hazards like bullying and workplace violence. This raises important questions about gender equality and safety in our workplaces.

What can we do?

So, what’s the way forward? For employers, it’s time to take a proactive stance. Implementing psychosocial risk assessments, providing mental health awareness training, and establishing clear policies on workplace bullying and harassment are great starting points.

Incorporating psychological health and safety into governance is essential for fostering a supportive workplace environment. Here are key strategies to effectively integrate these practices:

1. Establish clear policies

Develop comprehensive policies that explicitly state the organisation’s commitment to psychological health and safety. These policies should outline the responsibilities of management and employees in identifying and mitigating psychosocial risks.

2. Conduct regular risk assessments

Implement regular assessments to identify psychosocial hazards, such as workplace bullying, excessive workloads, and lack of support. Utilise tools like the People at Work (PAW) survey to gather data on employee experiences and psychological distress levels.

3. Foster a supportive culture

Create a workplace culture that promotes open communication about mental health. Encourage employees to share their concerns without fear of stigma. Training programs can help managers recognise signs of incivility, mental health issues and respond appropriately.

4. Provide training and resources

Offer training for all employees on mental health awareness and coping strategies. Ensure that resources, such as counselling services and employee assistance programs, are readily available and accessible.

5. Monitor and evaluate

Establish metrics to evaluate the effectiveness of psychological health and safety initiatives. Regularly review claims data, such as the increase in mental health-related workers’ compensation claims, to assess the impact of implemented strategies and make necessary adjustments.

6. Engage stakeholders

Involve all stakeholders, including employees, management, and health and safety representatives, in the development and implementation of psychological health and safety strategies. This collaborative approach ensures that diverse perspectives are considered and increases buy-in from all parties.

Workplace mental health is not just a personal issue – it’s a societal one. By creating safer, more supportive work environments, we can not only reduce the significant costs associated with mental health claims but also foster happier, more productive workplaces.

What steps will you take to promote mental health in your workplace? Remember, even small changes can make a big difference. After all, a mentally healthy workplace is a thriving workplace.

If you need assistance with your business governance, contact our advisers today!

About our advisers: 

Michael Fox has been dedicated to the success of his clients, devising comprehensive wealth strategies for both personal and business growth for over 4 decades. With extensive expertise in business governance and family business succession, Michael specialises in empowering emerging businesses and family enterprises by fostering renewal, enhancing value and smooth transitions to the next generation. Please do not hesitate to reach out if you need assistance.

Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.