NSW Community Services Industry Long Service Leave Scheme

On 1 July 2025, the NSW Government introduced a new Community Services Industry portable long service leave scheme, known as the Community Services Industry (CSI) Scheme (the Scheme). The Scheme is similar to those introduced by other states such as QLD and VIC.

Background and Rationale

Traditionally, long service leave (LSL) in Australia has been tied to an individual’s continuous service with a single employer. However, the community services sector is characterised by high workforce mobility, short-term contracts, and funding arrangements that often necessitate employment changes. This has historically resulted in many dedicated workers missing out on LSL entitlements, despite years of cumulative industry service.

Scheme Overview and Objectives

The new NSW Scheme is a statutory entitlement allowing eligible employees to accrue LSL based on service across the sector rather than with a single employer. Some key points about the Scheme include:

• Full time, part time, casual workers as well as self-employed contractors can be eligible for the Scheme.
• Workers become eligible for LSL after 7 years of service within the industry with 1 or more employers.
• The Scheme will allow eligible workers to claim up to 6 weeks’ LSL (after 7 years of service) with payment, based on ordinary wages (not including overtime)
• The new Scheme will be supported via a levy paid quarterly by eligible employers and any self-employed contractors who opt-in to the scheme.
• From 1 July 2025, employers with 1 or more workers in the Community Services Industry in NSW will be required to register with the Long Service Corporation (LSC) and begin recording worker service.
• The lodgement of the service returns and levy payments for the first 3 quarters (9 months) will be due in April 2026.
• Workers who appear on the first 2 service returns (1 July to 31 December 2025) will receive an automatic foundation worker bonus of 365 days of service credits on their record.
• The scheme does not over-ride the requirements of the Long Service Leave Act 1955 (NSW). Under this Act, employees are entitled to LSL if they work for one employer for 10 consecutive years.

Transition to the Scheme

Eligible employers have obligations as outlined in the Community Services Sector (Portable Long Service Leave) Act 2024 and as required by LSC. If you do not comply, penalties may apply.

Obligations in relation to the commencement of the Scheme are:

• Employers must assess their eligibility and apply for registration with LSC within 1 month of commencement of the Scheme (31 July 2025) or within 1 month of becoming an eligible employer after the Scheme has commenced.
• Employers must provide any change of details to LSC within 7 days of the change.
• A person must respond to requests from LSC within the specified timeframe.

How the Scheme Works

The Scheme will be administered by the NSW LSC, responsible for registering employers and employees, maintaining records of service, collecting employer levies, and managing leave payments.

Accrual of Service

• Employees will accrue LSL based on total service in the community sector, regardless of changes in employer.
• Service will be recorded in a centralised register, using employer reports and wage records. For the first 3 service returns (Jul to Sep 2025, Oct to Dec 2025, and Jan to Mar 2026) and levy payment are due in April 2026.
• For each quarter from the June 2025 quarter, there is a 14-day deadline to submit service returns and levy payments
• The scheme includes provisions to retain your accrued service for a period of four years even if you leave the sector.
• The accrual rate is similar to general NSW LSL provisions (typically about 8.67 weeks after 10 years of service).

Employer Contributions

• A levy will be paid by employers, calculated as 1.70% of gross ordinary wages to fund accrued liabilities.
• Gross ordinary wages, also known as ordinary remuneration, ordinary wages or ordinary time earnings, is the gross amount of salary or wages, plus included allowances, from various awards related to the Community Services Industry.
• The LSC manages these funds and makes leave payments when employees qualify.

Taking Leave and Portability

• Once an employee has accrued the requisite service, they may apply for LSL, funded by the Scheme.
• Leave entitlements remain intact as employees move between registered employers.
• On cessation of employment, retiring, or leaving the sector, workers may be entitled to a pro-rata payment for accrued LSL, subject to scheme rules.
• Leave payments will be made by the Scheme directly to employees unless employed prior to 1 July 2025.

Existing Employees at 30 June 2025

• Continue to have their LSL accrual maintained under the requirements of the Long Service Leave Act 1955 (NSW).
• Transitional arrangements require employers to pay a worker’s leave once they have reached an entitlement under the 1955 Act or an Enterprise Agreement. This is managed as an Employer Claim where the employer calculates and pays the full leave entitlement to the worker and seeks reimbursement from the LSC for the portion of the leave that has been contributed to the fund.

Implications for Employers

Community service employers in NSW must familiarise themselves with the new requirements, including:

• Registration of their organisation by 31 July 2025, and all eligible employees in April 2026 with the statutory authority.
• Implementation or updated of payroll systems to track employee service and report wages.
• Budgeting for levy contributions and ensuring timely payments.
• Review and update of internal HR policies and employment contracts to align with the Scheme.
• Communication with staff to explain the benefits and operation of the Scheme.
• Accounting implications for your organisations financial reporting.

Failure to comply may result in penalties, so proactive engagement is strongly advised.

Financial Accounting Implications

Long service leave liability

• The most important factor to consider is that the Portable LSL Scheme operates in addition to other existing LSL entitlements. This means that under the Long Service Leave Act 1955 (NSW) or a fair work instrument, workers may be entitled to LSL paid directly by their employer (subject to satisfying the service conditions specified by the Act or Instrument).
• Accordingly, employers continue to have a direct obligation for LSL entitlements under the Long Service Leave Act 1955 (NSW) or a fair work instrument. For example, if an employee satisfies the service conditions under the Long Service Leave Act 1955 (NSW) to be entitled to LSL, the employee can choose to have their entitlement paid directly by their employer (irrespective of their entitlement to claim LSL under the Scheme).
• On this basis, a LSL liability is recognised and measured in the usual manner (i.e. on a gross basis), in accordance with the obligations under the Long Service Leave Act 1955 (NSW) or a fair work instrument, and applying the requirements of AASB 119 Employee Benefits.
• The accounting entries are as follows:
  • DR LSL expense (P&L)
  • CR LSL provision

Levy expense

• The accounting treatment of the levy payable by employers to the LSC is covered by AASB Interpretation 21 Levies. This interpretation requires a liability to be recognised when the entity has a present obligation to pay the levy, with the obligating event being the activity that triggers the payment of the levy under the legislation (i.e. under the Scheme).
• In accordance with the Scheme, employers are required to pay a levy (at the prescribed rate) each quarter, based on the time worked and gross ordinary wages paid to eligible employees.
• Accordingly, the liability (and expense) for the levy is recognised when ordinary wages are paid to eligible employees. A levy liability (and expense) is not recognised for accrued (unpaid wages), as the obligation to pay the levy is created only when ordinary wages are paid to eligible employees.
• The accounting entries are as follows:
  • DR Levy expense (P&L)
  • CR Levy liability/cash

Reimbursement Right Asset

• The accounting treatment of the right (by employers) to claim reimbursements under the CSI Scheme (when an employee chooses to have their entitlement paid directly by their employer) is also covered by AASB 119 Employee Benefits. In accordance with AASB 119, a reimbursement right is recognised as a separate asset (i.e., not a reduction in the related LSL liability).
• AASB 119 requires the separate reimbursement right asset to be measured at fair value. In this regard, because the amount and timing of the reimbursement matches the amount and timing of the related LSL entitlement, the fair value of the reimbursement right asset equates to the present value of the related LSL obligation. Put simply, this means that the reimbursement right asset is measured on the same basis of the related LSL liability.
• In this regard, it’s important to remember that the reimbursement right asset relates only to LSL entitlements covered by the Scheme (i.e. relating to hours worked by eligible employees from the effective date of their registration under the CSI Scheme). Consequently, given the 1 July 2025 commencement date of the Scheme, the reimbursement right asset will relate only to a portion of the LSL liability recognised by an employer.
• The accounting entries are as follows:
  • DR Reimbursement asset
  • CR Levy reimbursement (P&L – can net against LSL Expense)

Useful Links

• CSI worker service record tool
• Manage employer service returns – Community Services Industry – details of Gross Ordinary Wages and return due dates
• Paying the levy – Community Services Industry – Levy payment due dates
• Community Services Sector (Portable Long Service Leave) Regulation 2025.
• Community Services Sector (Portable Long Service Leave) Act 2024 No 39 – NSW Legislation
• Community Services Industry portable long service leave scheme