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Training Guarantee (Suspension) Bill 1994

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House: Senate

Portfolio: Schools, Vocational Education and Training

Commencement: Royal Assent


To set the minimum training requirement for an employer at 0% of annual national payroll for 1994-95 and 1995-96 and provide that the training guarantee charge is not payable during those two years.


The Training Guarantee (Administration) Act 1990 (the Principal Act) introduced the training guarantee levy that requires employers to contribute a minimum of an amount equal to 1.5% of their payroll to structured training or, if they have not contributed this amount, to pay the shortfall as a charge (the training guarantee charge). Employers with a payroll below the threshold level of $226 000 for 1993-94 are exempt from the scheme.

The scheme aims to increase the skills of the workforce and to require employers to contribute to the cost of the increased skilling of the workforce. Prior to the introduction of the scheme, Australian Bureau of Statistics figures showed that approximately 75% of private sector employers with a payroll of $200 000 or more spent zero and 1% on training. 1

A number of arguments have been put forward for the abolition of the levy, including:

* it is an additional cost on business;

* the scheme is not achieving its aims as funds are spent on executive training, often with a large recreational component;

* employers are now contributing to training; and

* under enterprise bargaining, training opportunities can be negotiated between the employers and employees.

The main argument for the continuation of the levy is that it has resulted in increased training expenditure and therefore has, and is, achieving its aims and that the scheme limits the capacity of firms which do not spend on training to "poach" workers from firms that do.

The December 1993 report of the Taskforce on Regional Development, Developing Australia (the Taskforce), recommended that:

(a) the 1.5% Training Guarantee Levy on business should be suspended for three years;

(b) the company tax rate should be increased by one percentage point; and

(c) companies which take on trainees or apprentices would be able to deduct all unsubsidised costs for such employees from the one percent, in addition to the normal wage deduction allowable from before tax costs.


The Taskforce was told by regional employers that the levy had created an administrative burden and was failing to provide the training for which it was designed 3, and that:

while many employers were committed to providing training for all employees, other employers were distorting the intent of the program by spending training money on, for example, executive training weekends in luxury resorts.


The constitutional validity of the scheme was upheld by the High Court in Northern Suburbs General Cemetery Reserve Trust v. The Commonwealth 176 C.L.R. 555

The amendments proposed by this Bill give effect to an undertaking made by the Government in the May 1994 White Paper on Employment and Growth (the White Paper). In the White Paper, the Government announced that it would suspend the levy for two years from 1 July 1994 5, and gave a number reasons for doing so, including:

* the commitment by industry to meet its training obligations over the past few years; 6

* the expansion of entry level training; and

* the new training wage. 7

Main Provisions

Subsection 13(1) of the Principal Act provides that the training guarantee charge is not payable for a year unless an employer has a training guarantee shortfall in the year. Subsection 13(2) provides that the charge may also not be payable under sections 16 (employers with a payroll below the threshold level of $220 000), section 17 (certain public benevolent institutions and religious institutions) and section 18 (non-resident employers). Clause 3 adds to the list of exemption section by referring to proposed section 15AA (see clause 5 below).

Section 15 of the Principal Act sets the minimum training requirement for an employer at 1% of annual national payroll for 1990-91 and 1992-92 and 1.5% for later years. Annual national payroll is defined in section 4 as the salary and wages paid by an employer in the year in Australia or in connection with services performed in Australia. The effect of clause 4 will be set the minimum training requirement for an employer at 0% for 1994-95 and 1995-96.

A new section 15AA, dealing with the suspension of the training guarantee charge, will be inserted into the Principal Act by clause 5. Proposed section 15AA provides

that the charge is not payable by an employer for the financial years beginning 1 July 1994 and 1 July 1995.


1. Australian Safety News, July 1993, p. 44.

2. Taskforce on Regional Development, Developing Australia, December 1993, p. 8.

3. Ibid., p. 32.

4. Ibid.

5. Prime Minister, Working Nation - Policies and Programs, May 1994, p. 103.

6 Ibid.

7. Ibid.

Ian Ireland (Ph. 06 2772438)

Bills Digest Service 14 June 1994

Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1994.

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Published by the Department of the Parliamentary Library, 1994.