Just when you thought the latest saga of the Federal Budget debacle was behind us, there’s one more issue worth putting on your radar, and we promise we’ll keep it brief.
Following the May Federal Budget announcement proposing a 30% minimum tax on certain discretionary trust distributions from 1 July 2028, you may have received advice to consider a restructure of your business to move from a current trust to a company structure. From an employment law perspective, this proposed restructure may give rise to obligations owed to your employees under the transfer of business provisions of the Fair Work Act 2009 (Cth) (the Act).
For example, Business XYZ operates through The XYZ Trust, with all employees employed and paid by The XYZ Trust. If Business XYZ restructures to operate in a company as XYZ Pty Ltd, the assets and employees will be transferred from The XYZ Trust to XYZ Pty Ltd. However, this is not simply an administrative change from an employment law perspective, and requires careful planning to ensure compliance with the Act.
It is a well-established common law principle that employees cannot be transferred from one employer to another without their consent, as ‘no employee is an asset in the employer’s balance sheet to be bought or sold’ (Minister for Employment v Gribbles Radiology (2005) at [48]). As employment contracts are personal in nature, a transfer of business will often involve the termination of employment with the old entity and the commencement of employment with the new entity.
This subsequently attracts the notice requirements under section 117 of the Act (where applicable) to provide notice to the transferring employees. Employers must also consider the treatment of employee entitlements, including accrued annual leave, personal leave and long-service leave, and whether those entitlements will transfer to the “new employer” entity, or otherwise be paid out in accordance with the Act.
In short, if you are a business owner or adviser considering this type of restructure following the budget, do not overlook the employment law implications. Obtaining expert employment law advice early can assist in avoiding mistakes and ensuring that the transition is managed smoothly.
A business restructure also provides an ideal opportunity to review your employment contracts. If your contracts have not been reviewed by an employment lawyer within the last 12 months, they may not be compliant nor provide the level of protection your business needs.
Get in touch to discuss your options with our team.
Disclosure statement: This information is general in nature and does not take into account any individual’s or business’ specific circumstances. You should obtain independent legal advice before making any decisions based on this information. Liability limited by a scheme approved under Professional Standards Legislation.