Public consultation opens on super compliance proposals

| January 25, 2018

The public consultation on the proposed Superannuation Guarantee Integrity Package announced in August 2017 has opened and comments from both employers and employees will be welcomed until February 16 to allow all stakeholders to have their say.

Several industry bodies have backed the proposals, although they caution that more remains to be done to ensure all firms meet their obligations to contribute to their workers’ superannuation funds.

Minister threatens rogue employers with jail

Kelly O’Dwyer, the Minister for Revenue and Financial Services, argues that “these measures provide the ATO with more timely information to support earlier detection and proactive prevention of non‑payment of superannuation that is rightfully owed to employees.” The introduction of a Director Identification Number will also help identify directors who try to rob their employees of their superannuation entitlements.

Minister O’Dwyer underlines that there will be “serious consequences” for employers who break the law, including stronger director penalty notices and security deposits for superannuation and other tax-related liabilities.

In cases where employers ignore or defy directions to pay their superannuation dues, Minister O’Dwyer says the ATO will be able to apply for court‑ordered penalties, including up to 12 months’ imprisonment. The ATO will also be able to force employers to undergo training to “embed ongoing compliance”.

“These measures follow the recommendations of the Superannuation Guarantee Cross‑Agency Working Group, which made targeted proposals for overcoming barriers to better compliance,” Minister O’Dwyer said in a statement.

“The Working Group also recommended closing a loophole that could be used by unscrupulous employers to short‑change employees who use salary sacrifice arrangements. The Government introduced legislation to close this loophole last year, and will progress that legislation along with this broader compliance Bill.”

Super industry welcomes tougher measures

The Australian Institute of Superannuation Trustees has praised the Government’s proposals to protect workers’ super entitlements and tackle the problem of unpaid super by strengthening the Australian Tax Office’s ability to obtain real time information about an employer’s compliance with their super obligations.

The measures include extending Single Touch Payroll to all employees from 1 July 2019, providing the ATO with more timely information to support earlier detection and proactive prevention of non-payment of superannuation that is owed to workers.

Employers are legally required to pay 9.5% of ordinary time earnings in superannuation for every employee over the age of 18 earning more than $450 a month. However an Industry Super analysis of ATO data revealed almost one third (32%) of entitled workers were underpaid their super, costing them an average of over $2,000 each.

The CEO of the AIST, Eva Scheerlinck, said the move to make Single Touch Payroll mandatory for small employers would shift the burden of monitoring superannuation compliance from individual workers to the ATO.

“Extending single touch payroll to all employers should significantly improve the integrity of the super system and help tackle Australia’s 2.8 billion dollar unpaid super problem,” Ms Scheerlinck said.

“We know that the problem of non-compliance is greatest among small businesses, so it is very important that the ATO has all the available tools at its disposal to closely monitor this sector.”

The AIST also welcomed measures to introduce court-ordered penalties, including up to 12 months imprisonment, where employers defy directions to pay their superannuation guarantee liabilities.

“Superannuation is deferred wages and, in a compulsory super system, members must receive their full entitlements. Strengthening employer penalties for noncompliance and enhancing the ATO’s power to deal with repeat offenders is needed,” Ms Scheerlinck said.

However, Ms Scheerlinck argues that further measures were still needed to tackle the problem of unpaid and lost super. Such steps could include aligning superannuation payment with pay slip reporting cycles, removing the $450 monthly income threshold and encouraging the Australian Tax Office to develop a more holistic approach to the problem.

Industry Super Australia also backs the attempt to clamp down on employers who dodge paying their workers’ superannuation, but while its Director of Public Affairs Matt Linden welcomed the draft bill, he agreed it lacked several important policy measures.

“The extension of single touch payroll technology to all businesses regardless of size from 2019, and enhanced tax office enforcement powers are very welcome,” said Linden. “Single touch payroll will make it much easier to monitor and identify employers who skip their superannuation obligations, rather than the current regime of self-reporting”.

Despite these improvements, the legislation needs to go further because “in not aligning compulsory superannuation payments with regular wage cycles, these laws fall seriously short of protecting worker interests…A four month delay from when a super entitlement appears on a payslip to when an employer has to pay it to an employees’ fund is at odds with our digital world”.

He also called for reconsideration of the $450 per month super guarantee threshold, noting that “n the gig economy with increased casual work, the meagre threshold at which employees become eligible for super has reached its use-by-date.”