As of 1 October 2018, amendments to the Building and Construction Industry Training Fund and Levy Collection Regulations 1991 (WA) (Regulations) came into operation. The amendments repealed the previous exemption for mining construction works, with the effect that a broad range of mining and petroleum construction work is now subject to a 0.2% levy on the value of the construction work.
The levy is payable to the Construction Training Fund (CTF) and will be used to fund apprenticeships and training for the construction industry.
What is construction work?
“Construction work” is defined very broadly and includes:
- fabrication, construction, installation, demolition or maintenance works on a site (or which is normally, but not necessarily, carried out on site); or
- the construction, assembly, renovation or alteration of buildings or structures and related on-site work.
When is the levy payable?
The levy is payable prior to the commencement of construction work and is based on the estimated value of the construction work, with a reconciliation to occur at the end of the work once the actual value is known. If work is cancelled, the value of the levy paid on the cancelled work will be refunded.
The CTF has stated that the levy will only be payable on construction works which commenced after 1 October 2018.
How is construction work valued?
The estimated value of construction work is based on the value (including GST) of all goods (including manufactured goods) forming part of the construction work, labour, fees, overheads, profit and services. Where there is a contract in place which includes a value for each of the foregoing items, the estimated value will be the contract price.
The inclusion of manufactured goods in the value of construction work could add significant sums to the levy for the resources sector, where construction work is likely to involve the installation of plant or equipment manufactured offsite and the use of pre-fabricated buildings and accommodation is common.
Who pays the levy?
The levy must be paid by the “project owner”, being the permit holder, or, if no permit is required, the contractor to whom all of the construction work has been let, or if a multi-contractor project, the direct beneficiary or beneficiaries of the completed construction work. As building permits are not generally required in the resources sector, in most instances, the project owner will be a resources company, rather than a constructor. This is a change from the civil sector.
Failing to pay the levy prior to commencement of construction work is an offence, the penalty for which is $20,000 for a natural person or $50,000 for a body corporate. In addition, the project owner will be liable to pay the CTF a penalty of 100% of the unpaid levy per annum for the period that the levy is unpaid.
Are there any resource industry exemptions to payment of the levy?
The levy does not apply to the following works:
- resources operational work which involves:
- exploration or drilling for resources;
- construction of unsealed haul roads or tracks;
- works for non-potable water facilities; tailings, overburden or waste storage;
- excavation or backfilling of overburden;
- ground rehabilitation;
- decommissioning of plant;
- repair or maintenance of “resources facilities”, being structures or works used in connection with a resources operation; or
- alteration, renovation or relocation of an existing resources facility where the value is $10 million or less,
however any work relating to accommodation, crib, ablution or recreational facilities, offices, medical facilities, laboratories, warehouses, fuel depots and workshops will not be exempt;
- minor or routine maintenance or repairs carried out by employees for an employer whose primary activity is not related to the construction industry; or
- work valued at less than $20,000.
Additionally, the Minister may grant reductions in the levy where a project owner has met certain criteria regarding the provision of training arrangements.
Will the exemptions apply to shutdown work?
Maintenance or repairs carried out during shutdowns is likely to be considered routine or minor. Therefore provided that substantial improvements are not included in the shutdown work, it will fall within an exemption if it is performed by employees of the mining or oil and gas company itself or by an entity whose primary activity is not related to the building or construction industry.
The Building and Construction Industry Training Fund and Levy Collection Act 1990 (WA) requires the Minister to review the effectiveness of the Act and the CTF every 5 years. The next review is due in June 2019 and the CTF has stated that proceedings are already underway. Given the significant contribution that mining and petroleum projects will make to the CTF going forwards, we expect the review to be met with renewed interest from the resources industry.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021