ATO policing of Super Guarantee non-compliance “inadequate”: Senate inquiry

A Senate inquiry has found that the ATO’s approach to Super Guarantee non-compliance is inadequate, and recommended a range of changes to the SG system – including removing the $450 threshold and moving to at least monthly payments.

The Senate Standing Committee on Economics has been conducting an inquiry in Superannuation Guarantee non-payment and has now handed down its final report.

“The negative impacts of non-payment of the SG are pervasive and affect several distinct groups: namely employees, employers and the government,” says the report.

The committee conducting the inquiry found that the current approach of the ATO towards identifying and addressing SG non-compliance is “inadequate”. “The committee believes that the ATO’s current reactive approach is problematic, and recommends that the ATO shift the balance to a more proactive stance.”

The majority report made 32 recommendations in total, including:

  • The government strongly consider amending the SGA Act to require Super Guarantee to be paid at least monthly
  • The government strongly consider removing the $450 minimum monthly threshold for SG eligibility
  • The government amend the SGA Act so that salary sacrificed amounts cannot count towards an employer’s compulsory SG obligations.
  • The government review the definition of Ordinary Time Earnings for SG purposes
  • The government review the SGC regime and its management by the ATO
  • The government strongly consider expanding Single Touch Payroll to all businesses

However a dissenting report was issued by the Deputy Chair, Liberal Party Senator Jane Hume. Senator Hume said a number of the recommendations of the majority report were beyond the scope of the terms of reference of the inquiry. The Senator did say that the recommendation to remove the $450 threshold should be examined by the Government in the near future.

Another recommendation of the majority is for the Minister for Revenue and Financial Services, Kelly O’Dwyer, to publicly release, as soon as practicable, the interim and final reports of the multi-agency working group on SG non-compliance.

This working group started meeting in December 2016, according to Minister O’Dwyer, though this was only publicly announced in January 2017. The Senate Inquiry into Superannuation Guarantee Non-Payment was formed on 1 December 2016. The final report of the working group was due to be given to the Minister in March – the same month in which the final report by the Senate inquiry was originally due.

Following the release of the report a statement by the ATO said that the organisation “recognises the importance of the Superannuation Guarantee (SG) to the community and its vital role in providing for people’s retirement”.

Deputy Commissioner James O’Halloran said that the “vast majority” of Super Guarantee was paid voluntarily by employers, though noted there are reports of non-compliance from employees.

“In 2015-16 we undertook around 21,000 cases that addressed SG non-compliance, raising $670 million in SG, including penalties, from a range of reviews and audits,” Mr O’Halloran said.

“Since 2010-11 we have transferred almost $2 billion in SG entitlements to employee’s super funds as a result of ATO action.”

The ATO receives around 20,000 reports each year from people who believe their employer has not paid Super Guarantee.

“We have over 150 staff focused specifically on SG compliance. We examine every report of non-compliance and follow-up with the employer and if necessary undertake audits and apply penalties,” said Mr O’Halloran.

“We also have an additional 300 staff who review SG compliance in conjunction with Pay As You Go Withholding Tax audits targeted across a range of industries, regional areas and individual circumstances to address non-compliant behaviour,” he said.

Difficulty in establishing ‘SG gap’

The committee noted in the final report that it was difficult to precisely estimate the extent of non-payment of Super Guarantee due to gaps in the data.

“Although critical of the estimate put forward by Industry Super Australia, the ATO was unable to provide the committee with an alternative figure,” says the report.

“The committee is surprised at the ATO’s apparent reluctance to engage with the issue of producing an SG gap, particularly as the matter has been raised in numerous reviews dating back to 2010.”

One of the recommendations was: “…that the ATO prioritise its work on calculating and publishing an accurate, reliable estimate of the SG gap. Additionally, the committee recommends that the ATO commit to publishing the SG gap annually in order for progress to be tracked over time.”

Industry Super Australia said the findings of the inquiry are a wake-up call for the ATO, employers and government.

The report has also been welcomed by the  Australian Institute of Superannuation Trustees (AIST), which supports all 32 of the recommendations.

“Superannuation is a key component of an employee’s remuneration package and these recommendations will help ensure that appropriate consumer protections are in place,” said AIST CEO Eva Scheerlinck.

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