Updated: September 2016
Direct Payments – frequently asked questions for insolvency practitioners
From 1 July 2016, the Department of Employment commenced making payments directly into the claimant’s nominated bank account for all claims approved under the Fair Entitlements Guarantee (FEG). Below is a list of frequently asked questions to assist insolvency practitioners (IPs) understand the change.
Updated: September 2016
How are FEG advances paid?
From 1 July 2016 the Department pays claimants directly into their nominated bank account. Toenable the Department to make direct payments, the FEG claim form asks claimants to provide their bank account details and tax file number (TFN) information. IPs no longer provide distribution services. Direct payment of claims by the Department means claimants receive their payment within 2 business days of claim approval.
What changed and when?
From 23 March 2016, the Department expanded the FEG claim form to ask for payments approved from 1July2016.
Does FEG calculate and withhold tax?
Yes. The Department calculates, withholds and remits PAYG tax to the Australian Taxation Office (ATO). Tax is withheld in accordance with the Notice of Variation under section 15-15 of Schedule 1 to the TaxationAdministration Act 1953 (TAA) issued by the Commissioner of Taxation.
Advice detailing how tax has been calculated is included in all our payment letters to eligible claimants, and a fact sheet explaining how tax is withheld is on our website.
What about Child Support and Centrelink debts?
Once we are reasonably satisfied that a person is eligible for FEG assistance, we contact the Department of Human Services (DHS), who identify any outstanding debts and serve a garnishee notice directly on the Department to deduct from the FEG advance where relevant.
Does FEG issue PAYG payment summaries?
Yes. Payment Summaries will be issued by the Department with payment letters for eligible claimants. IPs will not receive a copy. Claimants who have registered with FEG Online Services (www.employment.gov.au/FEGonline) will also be able to acceess their Payment Summary online.
How is tax reported to the ATO?
PAYG tax is reported on the Department’s own Business Activity Statement. Therefore PAYG is reported under the Department’s Australian Business Number (ABN), not the ABN of the insolvent entity.
Does direct payment change FEG’s recovery rights?
No. Section 31 of the Fair Entitlements Guarantee Act 2012 makes specific provision for any payment made to be treated as a payment within the meaning of s560 of the Corporations Act 2001.
Will FEG provide IPs with notification of payments and the entitlements paid?
Yes. When a payment has been made, the Department will send IPs a proof of debt, including a breakdown of payments by entitlement type and claimant (i.e payment advice).
Do IPs still need to record FEG payments on 524 ASIC forms?
Where the Department pays the claimant directly, no receipts and payments should be recorded on the 524form. If the IP subsequently realises funds to pay a dividend, they will need to record the dividend payment on the Department’s ProofofDebt as a payment in the 524 form.
Updated: September 2016