Compensation Legislation Amendment Bill 2017

01 Nov 2017

Mr MORRIS (Mornington)  — I am pleased to rise to make what I anticipate will be some relatively brief comments about the Compensation Legislation Amendment Bill 2017. While there are two substantive matters that are affected by the bill, it is pretty straightforward. I think there are only eight clauses in the entire bill. Essentially the first impact it has is to amend the Transport Accident Act 1986, and the second effect is to amend the Workplace Injury Rehabilitation and Compensation Act 2013, also known as the WIRC act. In the case of the Transport Accident Commission (TAC) act the bill effectively abolishes the application of the excess, and with regard to their WIRC act it amends some provisions relating to apprentice jockeys. Beyond that, the impact is very minimal, so I will speak briefly to those, and then I want to talk about the broader issue of the resourcing of the Transport Accident Commission.

I should say first of all that the opposition was briefed last week, and I appreciate the briefing and the opportunity to discuss with the affected agencies the issue. I can also indicate at this point in proceedings that the opposition will not be opposing the bill.


With regard to the changes to the Workplace Injury Rehabilitation and Compensation Act 2013, the bill inserts new provisions that will in effect make the workers compensation arrangements for licensed jockeys and for apprentice jockeys comparable. There is a discrepancy at the moment with regard to the coverage of apprentice jockeys where, under most circumstances, they are covered by the trainers. But the proposal here is to change those provisions so that the arrangements for jockeys and for apprentice jockeys are uniform. Apprentice jockeys will be deemed to be employed by Racing Victoria while at specific locations and undertaking particular activities — that essentially means if they are engaged in riding work at an approved facility and/or riding to and from an approved facility.


There is, I understand, a little concern amongst the trainers — the member for Gippsland East will have more to say on this — that riding work undertaken in other locations is not to be covered. For example, if horses are being ridden on the beach in the course of the training activity, the apprentices would not, under those circumstances, be covered by Racing Victoria. But the key issue with regard to this bill is that under most circumstances, whether moving to or away from approved facilities or actually engaged in riding work at approved facilities, the apprentices are covered.


The second aspect of this bill relates to amendments to part 2 of the Transport Accident Act 1986. Again, they are relatively straightforward — effectively they abolish the current excess arrangements. I think these are reasonable proposals. The intent, as I understand it, is to improve the client experience. In the context of the briefing, we were advised that, while previously it took up to two weeks for a claim to be accepted, under the current service standards it is down to two days. By maintaining the excess, there is, as was originally intended, a disincentive created, but the difficulty with that disincentive is that it becomes then an impediment to early treatment. Because people need to put money out in order to recover it, they do not necessarily get the attention they need in a timely fashion, as is desirable. As I understand it, the intent of these amendments is to seek a speedy resolution for the client, both in a health sense and in terms of the claim.


There is of course a cost, which we are led to believe is relatively modest, of $6 million. It is a lot of money, but in the context of claims of in excess of $1.2 billion it is probably a relatively small amount of money.


My concern is with regard to the health of the organisation overall, and in particular the impact that the constant taking of dividends by the government has on the Transport Accident Commission (TAC). If you look at the commission's last three annual reports, you will see that while the bottom line for the 2016–17 financial year is much improved, essentially that is from a change in value of assets in a positive sense of more than $1 billion. If you go to last year's report, there were accrued losses. Indeed when we were going through the estimates process earlier this year, there was quite an interesting discussion, depending on your interests I guess, around the impacts of —


Mr Pearson interjected.


Mr MORRIS — Some seek excitement, and accounting standards excite some of us. It was in particular around the review and potential amendment of the accounting standard that applied to insurance organisations. That was the initial discussion because, when the budget was brought down we, being the opposition, had a look to see what was happening in terms of dividends from the TAC — they are a matter of perennial interest — and there were not any there. Given that the figure proposed over the forward estimates last year was in excess of $1.3 billion, I think we all thought it was reasonable that those amounts were probably somewhere else in the budget. It turned out they were, but it was not as the secretary of the department initially believed might be the case — that it was because of a change in accounting standards.


As we in fact established, it was because there were some issues with taking dividends from a corporation that was not only not making any money, but at that point had accrued losses. Despite assurances from both the Treasurer and the Minister for Finance over the last three estimates that it was very healthy financially and there were no problems, the reality is the government could not this year take dividends from the TAC because, had they called them dividends, they would have breached the accounting standards.


The most recent report of the Public Accounts and Estimates Committee carries a copy of a letter from the Auditor-General. He says in part that:


The budget treatment through to 2019–20 is based on a precedent established during the 2015–16 audit of the TAC, whereby a repayment of capital of $78 million — requested by the Treasurer in accordance with section 29A of the Transport Accident Act 1986 — was recognised in their Comprehensive Income Statement as an expense … This repayment was in addition to interim and final dividend payments disclosed in their Statement of Changes in Equity.


The particular financial circumstances that led to this treatment were that the TAC had:


and this is the important point —


already incurred a current year loss before the capital repayment was taken into account


carried forward accumulated deficits from the previous year which were increased by the current year loss —


so there was a cumulative effect —


no contributed capital or other equity from which to draw.


As I mentioned, this year the books look a whole lot better, thanks to a $1000 million move in terms of the valuation of investment funds, but that did not stop the Treasurer taking another $29.5 million out of the TAC prior to 30 June, again by way of a capital return.


As the secretary of the department advised the Public Accounts and Estimates Committee at his second appearance with the Minister for Finance towards the end of the estimates hearings, and again this is contained in the committee's report tabled yesterday, the TAC is expected to pay grants — they are now called grants, not dividends — of $505 million in the current financial year, $431 million in 2018–19, $563 million in 2019–20 and $252 million in 2020–21. From memory, that is a significant increase — some hundreds of millions of dollars more than for the current year in the forward estimates — than was anticipated last year.


I reiterate my concern that enormous sums of money are being shifted out of the TAC in order to prop up the bottom line of the budget. I do not think there is any doubt about that — half a billion dollars or more in this financial year alone when we have a corporation that had for a number of years sustained losses.


As I mentioned, it has had a much better year this year, but essentially it is investment income, not operating income. There is a real risk that if you strip out that one-year profit and they have a bad year this year in terms of their investments, the organisation could be in serious trouble. But in the context of this bill, the advice that was given to the opposition was that the forecast cost would be $6.5 million in terms of removing the excess, on the basis of $1.2 million in payouts.


It will be interesting to see whether that is exactly the way it works out. If that is the cost and that is the proportion — and I believe those figures to be accurate — then it seems to me to be a reasonable policy step to take if it results in improving the circumstances for TAC clients and if it results ultimately in improving the medical outcomes for those clients. On that basis, the opposition will not be opposing the bill.