What’s new with the FEG?
18 March 2016
What is the FEG? Fair Entitlements Guarantee (FEG) is a scheme to assist employees whose employment has ended due to an insolvency event with their employer. FEG provides financial assistance, called an advance, to cover certain entitlements that are owed.
The FEG is administered by the Department of Employment ("Department"). The Department relies on assistance from Insolvency Practitioners ("IPs") to facilitate FEG.
The role of IPs has been to:
- Verify employee entitlements from the company's books and records;
- Distribute the FEG claim forms to employees and assist them with submission to the Department; and
- Distrubte FEG advances to employees including calculating tax withheld and remitting tax to the Australian Taxation Office ("ATO").
Changes to the FEG
From 1 July 2016 there will be two major changes to the operation of the FEG which have an impact on the role of insolvency practitioners. The changes are aimed to improve timeframes of payments and communication between the Department and IPs:
- Direct Payments
The Department will advance entitlements directly to the claimant's nominated bank account within two business days of the claim being approved.
Claimants will be required to provide their Tax File Number and nominate a bank account on their claim form. The Department will calculate, withhold and remit PAYG tax to the ATO which will be reported on the Department's own business activity statements under the Department's ABN as opposed to the insolvent entity's ABN.
The Department will also issue claimants with a PAYG payment summary which will be sent directly to claimants together with their payment letter.
This change will make the claim process quicker and easier for employees and drastically improve the timeframe for claimants to receive their entitlements (currently approximately up to 14 days after claim is approved) and significantly reduce the administrative burden on IPs distributing the payments and reporting back to the Department.
- FEG IP Online
This is a new online portal for communication between the Department and IPs, designed to improve and streamline interaction and management of FEG tasks and claims. The target date for IP online is 1 July 2016.
FEG IP online allows IPs to:
- Upload any information as relevant to a FEG claim and/or requested by the Department including invoices or creditor reports;
- View all cases whether current or archived; and
- View cases for which an IP is appointed Liquidator or Trustee but not providing verification services.
- Other benefits of FEG IP Online:
- New cases should be active on FEG IP Online within 1-2 business days of the first FEG claim being received.
- IPs will receive automatically generated email notifications when a new task is assigned to them and the Department has requested a verification or initial questionnaire. The verification spreadsheet will be sent to an IP through FEG IP Online and, once completed, can be submitted back to the Department through the portal.
IPs will be able to see the following case details through FEG IP Online:
- A list of claims received;
- Status of claims;
- Amounts claimed;
- Amounts paid by FEG; and
- Total FEG payments for a case
- The Department may upload documentation submitted by an employee if it will assist the IP (although not automatically available to view).
- There will be different approval levels for tasks – some will need to be approved by the IP appointed to the matter, other tasks may be completed by the IP liaison.
Benefits to Employees
Employees will benefit from the FEG changes as follows:
- Simple, streamlined FEG Claim Form which can be submitted online directly to the Department; and
- Timely receipt of FEG benefits – within 2 days of claim approval.
New role of IPs
- Assist the Department, as requested via the FEG IP Online portal, including completing the verification spreadsheet and uploading relevant supporting documentation; and
- No longer required to disburse FEG payments to employees or to calculate and withhold PAYG and remit to ATO.
Transitional arrangements and Key Dates
As with any change to a scheme, there are transitional arrangements in place from 23 March 2016 until Direct Payments and FEG IP Online are fully operational on 1 July 2016.
23 March 2016 – New FEG Claim form released for employee claims. This form will include TFN and bank account details. All fact sheets and guidance material will also be updated on this date. All old FEG claim forms should be destroyed.
23 March 2016 to 30 June 2016 – The Department will prioritise claims lodged on the old FEG form and work to approve these claims by 30 June 2016. IPs will continue to disburse these payments (and be paid for same). IPs may continue to receive FEG payments for distribution for a short period subsequent to 1 July 2016, but only for claims which have been approved prior to 30 June 2016.
1 June 2016 – The Department will write to all employees who have lodged FEG claims on the old form and whose payment is pending (and unlikely to be finalised by 30 June 2016) requesting they submit their TFN and bank account details securely through FEG Online Services to allow the Department to make a direct payment subsequent to 1 July 2016.
30 June 2016 – The final date for the Department to approve a FEG payment lodged on the old FEG form. IPs may continue to receive payments for distribution for a short period subsequent to 1 July 2016, but only for claims which have been approved prior to 30 June 2016. IPs will be paid for distributing FEG payments approved up to 30 June 2016.
1 July 2016 – All FEG payments approved will be paid directly to the employee's bank account. IPs will have access to FEG IP Online for communication with the Department and tracking of claims.