ATO campaign against non-payment of staff super
Employers’ unpaid superannuation contributions now total $3.6 billion annually, and data collected from a range of government agencies shows that 97% of offenders are owners of small businesses.
To enforce compliance more effectively, in coming months the Federal Government will enact a new packet of legislation requiring, among other things, that super funds report data more frequently to the Australian Taxation Office (ATO).
The package will also give tax officers additional powers to issue Director Penalty Notices (DPNs).
How the reforms will work
The new legislation, in requiring super funds to report contributions they receive at least monthly, will enable businesses’ non-payments to be more readily discovered.
Although details have yet to be announced, it’s understood employers considered high-risk for non-compliance and thus potential targets for DPNs, will be required to lodge security bonds with the ATO. This is expected to considerably strengthen the DPN regime.
Furthermore in future, the ATO will be able to seek penalties in the Courts against employers who repeatedly fail to meet their tax obligations and make no effort to repair injustice caused by their non-compliance.
The reform package fulfils a commitment from the Federal Government to close a loophole exploited by unscrupulous employers reducing super guarantee payments below the required 9.5% for employees who are salary sacrificing into super.
Head of Policy at CPA Australia Paul Drum sees the reforms as “striking a good balance”. On the one hand “workers are protected”, although on the other “it’s expected the additional reporting required from super funds will increase their compliance costs”
Why have SMEs been targeted?
The reform package responds to a report compiled from series of cross-agency checks in January that revealed only 3% of all complaints about unpaid super didn’t come from small businesses.
The report also indicated the ATO should be concerned not only about the behaviour of those 97% of all employers who were subjects of complaints, but also employers who employed themselves within incorporated businesses. Cross-agency data revealed many such employers, possibly in ignorance as distinct from neglect or illegal intent, were not however paying themselves the superannuation guarantee. In failing to do this they were, for whatever reason, nonetheless breaking the law.
Macks Advisory’s advice is that even if individuals are paying their own wages, failure to also pay themselves super, could put them in situations where they’d be subject to penalties.
In recent months, there have been escalating demands from regulators for more extensive tracking of employers to ensure they’re paying super entitlements on time, and the Inspector General of Taxation, Ali Noroozi, has recommended random audits be undertaken to uncover irregularities in the records of SMEs.
Penalties and changes
The ATO can already act to inflict a range of charges and penalties that may include an initial “superannuation guarantee charge” on businesses discovered not to have paid correct super entitlements on time. This charge consists of interest on non-paid super, plus a quarterly administration fee of $20 per employee until the correct amount has been paid.
The ATO may also consider issuing DPNs directly against employers in order to collect unpaid super.
However, employers who may have paid part of employees’ super entitlements and/or who have failed to keep proper records can also be liable to a range of penalties.
The Minister for Revenue and Financial Services, Kelly O’Dwyer, says that moving all Australian businesses to Single Touch Payroll (STP) processes during the next two years is expected to remove administrative burden involved in superannuation payments, while also ensuring workers’ entitlements are paid promptly.
She adds that all employers with 20 or more employees must be using STP processes by July 2018, and small businesses will need to start transitioning to the system by July 2019.
