Worker entitlement funds

Legislative reference: sections 58PAExternal Link and 58PBExternal Link of the FBTAA.

A worker entitlement fund is a (trust) fund for employee long service leave, sick leave or redundancy payments. These funds are often referred to as redundancy trusts or redundancy funds. Although these funds operate in a variety of ways, their purpose is to manage employee entitlements and provide portability and protection.

Contributions to worker entitlement funds for the FBT year commencing 1 April 2006, and for all later FBT years, will be exempt benefits where the payment is:

  • made to an approved worker entitlement fund
  • made under an industrial agreement, and
  • either for leave, redundancy or the reasonable administrative expenses of the fund.

A payment made according to an existing industrial practice or an existing fund will not be exempt from FBT unless it satisfies the above criteria.

Approved worker entitlement funds

A fund can only be an approved worker entitlement fund if it is limited to making payments to the employee for whom contributions were received. However, upon the death of an employee, the fund is able to make payments to the employee’s dependants or the trustee of the employee’s deceased estate without losing its status as an approved worker entitlement fund.

Approved worker entitlement funds comprise:

  • all long service leave funds established by or under a Commonwealth, state or territory law
  • funds that have been prescribed in the FBT regulations as approved worker entitlement funds (pre 28 June 2011)
  • funds that we have endorsed since 28 June 2011.

Funds that were prescribed before 28 June 2011 will be taken to be endorsed from 28 June 2011.

End of attention

From 28 June 2011:

  • the Australian Business Registrar (ABR) is required to enter a fund or entity as an endorsed fund or entity on the ABR by 28 December 2012
  • all approved worker entitlement funds must have an Australian business number (ABN)
  • existing funds that did not have an ABN had until 28 December 2011 to obtain an ABN
  • we are able to revoke the endorsement of a worker entitlement fund in certain situations.
    Last modified: 08 Jan 2014QC 17820