Historic low worker’s comp scheme premiums under threat by court decision

South Australia’s worker’s compensation scheme had the lowest ever average premium rates of 1.65 per cent last financial year – but there are fears these could rise above 2 per cent next financial year as a result of a pending court decision.

The ReturnToWorkSA Annual Report 2020-21, tabled in Parliament today, highlights the scheme’s financial accounts have been significantly impacted by legal uncertainty arising from the Supreme Court’s decision in the matter of Summerfield – with a $584 million provisional liability set aside in 2020-21 based on independent actuary advice as a result, and the scheme recording a $418.9 million loss as at 30 June 2021.

A further $500 million in liability is likely should ReturnToWork’s appeal to the High Court of Australia be unsuccessful. Summerfield concerns compensation for multiple injuries which may arise from the same cause.

“All told, should ReturnToWorkSA be unsuccessful in their appeal, the scheme will need to carry almost $1.1 billion in additional liabilities and its ongoing costs will be significantly increased,” said Treasurer Rob Lucas.

“The financial impact of the Summerfield matter is reflected in the $418.9 million loss, as at 30 June this year. But for this unforeseen circumstance, ReturnToWorkSA would have been able to post a profit of $165.1 million.”

“I am advised this matter now threatens the sustainability of the scheme, with provisioning for Summerfield moving the funding ratio to 91.9 per cent. If the Supreme Court decision stands, the scheme funding ratio would decrease to approximately 80 per cent, meaning it will not be fully funded.”

“It would not be unrealistic to expect the average premium rate – which have remained at a low 1.70 per cent in 2021-22 – to be above 2 per cent next financial year.”

South Australia’s Return to Work scheme protects approximately 550,000 workers and 54,000 employers from the costs of work injury.

“The annual report shows that the scheme, which was enacted by Parliament with bi-partisan support, has performed very well overall, despite the ongoing legal uncertainty. I am advised that employers have saved $1.7 billion through lower premiums since the scheme’s commencement.”

The High Court of Australia will hear ReturnToWorkSA’s application for permission to appeal the Summerfield decision on 5 November 2021 to decide whether the matter should proceed to a full hearing.

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