Australia's wages scandal has the potential to create a financial minefield for welfare recipients or anyone else receiving means-tested government assistance.
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A day after Target became the latest retailer to admit owing millions in back pay to employees, a leading academic has warned that sizeable payouts could be detrimental to those receiving government support and a strategy is needed to protect the most vulnerable in society.
Griffith University Finance lecturer Dr Di Johnson said the government should not penalise recipients of back payments with large lump-sum taxes or dilute their benefits because it was through no fault of their own they were underpaid.
"A lot of these people historically would have been pretty low paid and some may have earnt that little they would not have been taxed at all," Ms Johnson said.
"Traditionally it's just been lumped in the current year ... this is going to add a level of complexity and put people at a disadvantage unless there's some forethought put into it."
On Wednesday, Target became the latest large Australian company to become embroiled in the wage theft scandal by disclosing $9 million in underpayments to staff.
Previously, major Australian supermarkets Coles and Woolworths, known for having strong casual workforces, announced they had underpaid staff by almost $30 million and $300 million, respectively.
Other companies such as Commonwealth Bank, Qantas and the ABC also have confessed to making underpayments.
Ms Johnson says there are options available for those who receive back pay to cushion any tax blowout or watering down of their benefits, but it depended heavily on individual circumstances.
Recipients could alter previous tax returns, although that was time-consuming, or place all or part of their back pay into super to reduce the tax liability, but they had to be mindful of not crossing the $25,000 concessional tax rate.
"It's never really going to be fair, but it takes leadership and there are options out there," she said.
"These people have done nothing wrong and it could be a chance for Centrelink to use some administrative discretion to ease the burden for these individuals," she said.
Ms Johnson also spoke of missed opportunities for recipients to make deductions and whether the back pay will be paid with interest.
Australian Associated Press
