The Board of Taxation has recommended changes to the superannuation guarantee and super guarantee charge in order to remove unreasonable burdens on small business.
The Board of Taxation Review of Tax Impediments Facing Small Business was announced in March 2014 to “conduct a fast-track review to identify features of the tax system that are unreasonably or unnecessarily hindering or preventing small businesses from pursuing and achieving their commercial goals.”
Though not a recommendation the Board of Taxation considers it is worthwhile investigating aligning the definition of an ’employee’ for superannuation purposes with the definition under “PAYG withholding, Fair Work provisions, workers compensation, State payroll taxes and a number of State labour laws”
Quarterly minimum threshold for superannuation guarantee
The Board of Taxation says that “small businesses, in particular those industries employing a large number of seasonal workers, have complained about having to pay superannuation contributions for a large number of workers.”
As such, the Board of Taxation has recommended that the current $450 monthly minimum threshold for payment of superannuation guarantee should be extended to a quarterly threshold of $1,350.
“The Board recognises that this may exclude some low income earners from superannuation coverage. However, it will reduce compliance costs for small businesses, particularly for those with a large number of short-term casual employees.”
The report says that the ATO considers this to be “relatively straightforward to implement,” but would require legislative amendments.
Superannuation Guarantee Charge
The Board of Taxation also makes a number of recommendations regarding the superannuation guarantee charge (SGC).
The Board considers that the operation of the SG Charge regime is unnecessarily harsh, often with disproportionate outcomes, and very limited discretion by the Commissioner to take into account factors surrounding a late payment.
The Board of Taxation recommends that the SGC should be calculated based on Ordinary Time Earnings (OTE), like the superannuation guarantee, instead of salary and wages.
“While OTE is a more complex definition it would mean no change to employers’ current calculations.”
The report also recommends a redesign of the SGC components, with the Part 7 penalty and administrative fee of $20 to be replaced with an administrative penalty.
“The Board considers that the non-deductibility of the SG Charge is unreasonable.” Instead the report recommends that the SGC and any offsetting contributions should be deductible.
The Board of Taxation also thinks the requirement for employers to lodge an SGC statement when they become liable for SGC should be removed.
The Review of Tax Impediments Facing Small Business report was given to the Government in August 2014, though it has only now been released.
The Superannuation Guarantee recommendations are the only ones which the Government has specifically addressed, with the Minster for Small Business, Bruce Billson, saying:
The report noted that superannuation penalties can be harsh, with disproportionate outcomes. The Government will ensure that penalties for employers who inadvertently pay their superannuation guarantee late or short pay their employees’ contributions by a small amount reflect the nature of the breach. These changes will take effect from 1 July 2016.
Mr Billson also said “the Government recognises that the Australian Taxation Office has already begun implementation of most of the administrative recommendations identified in the report.”
“The report will also be an important input to the Government’s broader considerations on small business taxation and is particularly timely ahead of the Government’s release of the Tax White Paper. ”
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