Mr President, I rise to give a statement about the tabling of the 2020-21 Annual Report of the Return to Work Corporation of South Australia (ReturnToWorkSA).
The Return to Work scheme is a critical contributor to South Australia’s economy, protecting approximately 550,000 workers and 54,000 employers from the costs of work injury.
The scheme was transformed with the Return to Work Act 2014, which was introduced with bi-partisan support and which provided more certainty for employers and workers.
The design of the Scheme, thanks to the Return to Work Act, has delivered historically low premium rates while providing, arguably, one of the most generous injured-worker benefit packages in the country. This provides improved certainty of benefits for workers and increased stability in premium rates for employers, ensuring a Scheme that is fair, balanced and financially sustainable.
With the commencement of the Return to Work Scheme, the majority of injured workers are better off. Whether that is through early intervention and treatment to return injured workers back to work, or the removal of two step-downs in the first twelve months of income support. Injured workers now have a Scheme that supports a full year of income support at 100 per cent weekly earnings and up to three years of medical costs are covered. This scheme also introduced economic loss lump-sum payments, previously unavailable, the removal of work capacity reviews and for seriously injured workers, support, rather than an obligation to return to work.
Since the Scheme’s commencement, approximately $1.7billion less in premiums has been collected by ReturnToWorkSA than if the old Scheme had continued. That money, which would have otherwise come to ReturnToWorkSA is in the hands of employers, and circulating in the South Australian economy, helping to create more jobs.
However, a recent Supreme Court interpretation of a key provision of the Act in the matter of Summerfield, now threatens the sustainability of the scheme and stands to undo some of the achievements to date.
In our modern and safer workplaces, ReturnToWorkSA forecasts approximately 80 workers reaching the Serious Injury category per year. In simple terms, the interpretation provided by the Courts paves the way for approximately 70 more injured workers to reach the Serious Injury threshold per year and approximately 180 injured workers each year to receive higher lump-sum payments.
For each injured worker that reaches the ‘seriously injured’ threshold, ReturnToWorkSA expects to spend $2million providing income support until retirement age and covering medical expenses for life.
To protect the objectives of the scheme in the interests of all participants – and for the competitiveness of the State, ReturnToWorkSA is taking all possible steps as the scheme’s administrator to challenge this decision in the Courts.
We believe the Summerfield decision is an unforeseen interpretation of the Act’s wording and at odds with Parliament’s intent.
ReturnToWorkSA has set aside $584million as part of its 2020-21 financial results due to the current decision. A further $500million in liability is likely should the appeal to the High Court of Australia be unsuccessful.
All told, should ReturnToWorkSA be unsuccessful in their appeal, the Scheme will need to carry almost $1.1billion in additional liabilities and its ongoing costs will be significantly increased.
The financial impact of the Summerfield matter is reflected in the $418.9million loss, as at 30 June 2021. But for this unforeseen circumstance, ReturnToWorkSA would have been able to post a profit of $165.1million.
The provisioning for Summerfield has also moved the funding ratio to 91.9 per cent. If the decision stands the scheme funding ratio would decrease to approximately 80 percent, meaning it will not be fully funded.
Should the appeal be unsuccessful, future unanticipated additional lump sum and serious injury payments will place significant upwards pressure on the average premium rate. It would not be unrealistic to expect the average premium rate to be above 2 per cent.
If not corrected, ReturnToWorkSA will need to collect more than $100million in additional premiums annually ongoing. These additional costs, to employers, not tax payers, would likely cost the South Australian economy 20,000 jobs over the next five years.
ReturnToWorkSA has been advised that the High Court of Australia will hear oral arguments for their application for Special Leave to Appeal on 5 November 2021. I anticipate providing Members with a further update in the sitting week of November 2021.