The Government is currently seeking submissions on an exposure draft of the Treasury Laws Amendment (Taxation and Superannuation Guarantee Integrity Measures) Bill 2018 (the draft Bill). The draft Bill strengthens the powers of the Australian Tax Office (ATO) in relation to the payment or non-payment of the Superannuation Guarantee and makes some related compliance changes.
In today’s article, we summarise the five key changes in that draft Bill. To ensure that you are fulfilling your existing Superannuation Guarantee obligations make sure you consult professional tax advice.
By Dr Drew Donnelly, Compliance Quarter
Background to the Superannuation Guarantee
Superannuation Guarantee is the amount that an employer is required to contribute towards an employee’s superannuation. It is payable quarterly and if an employer fails to pay they are liable to pay a penalty known as the Superannuation Guarantee Charge which is calculated on the basis of an employee’s entire salary or wages.[1]
A Superannuation Guarantee Cross-Agency Working Group was established in December 2016 to review the superannuation guarantee system in Australia. That Working Group reported back in March 2017 with a set of final recommendations on options to improve Superannuation Guarantee compliance (see https://treasury.gov.au/publication/superannuation-guarantee-non-compliance/).
The Working Group identified that, while there are existing ATO powers and applicable penalties for employers who fail to comply with their Superannuation Guarantee obligations, those powers and penalties are insufficiently fine-grained. They do not distinguish between employers who have made an honest mistake and those who are intentionally refusing to pay their superannuation liability.
The draft Bill attempts to rectify this through the creation of a new ‘Direction’ power, as well as a range of other amendments designed to improve Superannuation Guarantee compliance.
The Changes
- Direction Power
Where the ATO is satisfied that there has been a failure to comply with a Superannuation Guarantee obligation, or to pay a charge, ATO will be able to issue directions to employers to comply with the obligations or to enter into a course of education.[2] The person who receives the direction will be required to comply with the direction and prove to ATO that they have done so. Failure to comply will be subject to administrative or criminal penalties.
- Disclosure of information about non-compliance
The draft Bill also provides ATO with a new disclosure power. The draft Bill permits the ATO to disclose to an employee information regarding:
- A failure by the individual’s employer or former employer to comply with the employer’s superannuation obligations;
- A reasonable suspicion that there has been a failure to comply with the employer or former employer’s obligations, or
- Any actions taken by ATO in relation to such a failure or suspected failure. [3]
Under current law, the ATO is only permitted to make such disclosure where an investigation has been initiated by a complaint directly from an employee.
- Single Touch Payroll
Currently, the Superannuation Guarantee and the basis on which it is calculated (ordinary time earnings) is not reported by all businesses directly to the ATO. Rather, for some small businesses, employer contributions are only reported by Superannuation Funds to the ATO, which creates limited visibility of non-payment and a time-lag for ATO.
In light of this, the draft Bill will extend of Single Touch Payroll reporting under Division 389 in Schedule 1 to apply to all employers (including small businesses).[4]
- Fund Reporting
The Draft Bill also contains some changes to the rules around Superannuation Fund reporting.
Schedule 4 of the draft Bill allows the ATO to provide superannuation providers with a grace period for correcting false or misleading statements in relation to member information statements without giving rise to penalties.
Schedule 4 also removes the requirement for employers to separately report Superannuation Guarantee contributions paid to superannuation providers under the Single Touch Payroll reporting rules, as this will already be reported under event-based reporting that comes into force in mid-2018.
Schedule 4 reintroduces a previous measure to remove the requirement for superannuation funds to lodge bi-annual statements for lost members.
If you would like to discuss the Superannuation Guarantee or any aspect of this article please get in touch with the regulatory specialists at Compliance Quarter by clicking here.
[1] See p15, Superannuation Guarantee Non-compliance: A report to the Minister for Revenue and Financial Services, Superannuation Guarantee Cross Agency Working Group, 31 March 2017.
[2] See Schedule 1, item 3, subsection 296-10(1) in Schedule 1 to the Tax Administration Act 1953 (TAA) and Schedule 1, item 3, subsection 295-10(2) in Schedule 1 to the TAA.
[3] See Schedule 2, item 2, item 7A to the table in subsection 355-65(3) in Schedule 1 of the draft Bill.
[4] See Schedule 3, item 6, subsection 389-5(1) in Schedule 1 of the draft Bill.
