The effectiveness of a proposed amnesty for employers who haven’t paid Super Guarantee has been questioned by the superannuation industry.
The Government recently introduced a Bill to Parliament in a second attempt to implement an amnesty for employers who have not paid the Super Guarantee owing for their employees.
The amnesty enjoys support from some sectors, while being criticised as legitimising ‘wage theft’ from others. Additionally, the effectiveness of the amnesty has come into question in submissions to a Senate committee inquiry into the Bill.
The Australian Institute of Superannuation Trustees (AIST), in its submission, says that the amnesty wouldn’t be an effective compliance tool and would undermine other initiatives aimed at improving Super Guarantee compliance.
AIST says the amnesty will tell employers who are breaking the law that they will be protected from consequence.
AIST points to a “wealth of academic literature” on tax amnesties which “overwhelmingly” conclude that amnesties aren’t an efficient way to improve compliance.
“An amnesty may also have the effect of undermining the integrity of tax systems, and in this case, the superannuation system. For example, amnesties may reduce the compliance of hitherto honest employers.”
“Fundamentally, superannuation theft should be punished not rewarded, and Government support should be provided to the majority of employers that want to meet their superannuation obligations and be good corporate citizens.”
Unlike AIST, Industry Super Australia (ISA) supports the intention of the amnesty – to encourage employers to fix historical non-payment of Super Guarantee – but likewise raises issues.
ISA, in its submission, says that amnesties “can have mixed results”, pointing to academic literature, and to be effective it needs to be “accompanied by strong penalties and a clear message that there will be no further amnesties”.
“Unless it is made clear to employers that the proposed amnesty will not be repeated, there is risk that some employers may opt to take the calculated risk that they will have another opportunity to remedy SG non-compliance without penalty in the future.”
While it appears that ISA is not opposed to the amnesty, it does recommend several other measures the Government should also implement – including requiring Super Guarantee to be paid at the same time as salary, increasing oversight of the ATO’s approach to monitoring compliance, and more imposition of the available penalties.
The Association of Superannuation Funds of Australia (ASFA) is, “on balance”, supportive of the amnesty, saying it “should help to boost superannuation balances” for workers.
“We note that since the announcement of the amnesty, there has been an increase in businesses paying outstanding employee superannuation contributions and are hopeful that legislating the amnesty will encourage more employers to come forward.”
Some accounting bodies also support the amnesty. The Institute of Public Accountants (IPA) “commends” the Government for bringing a Bill for the SG amnesty back to Parliament.
“We fully support the extended amnesty as it gives employers who wish to be compliant the opportunity to make good past underpayments and we encourage all Parliamentary parties to support the measure.”
“The Opposition previously did not support the amnesty on the basis that employers should not be rewarded for SG non-compliance,” said the IPA. It does not appear that Labor’s position has changed.
“While any non-payment of this worker entitlement represents wage theft; a practice never to be condoned, the IPA supports this amnesty period as it incentivises employers to come forward and do the right thing by their employees by paying any unpaid superannuation in full.”
Chartered Accountants Australia and New Zealand (CAANZ) says the existing penalties for Super Guarantee non-compliance “discourages employers from seeking to correct their mistakes”.
While acknowledging there was “some merit” in the argument that the amnesty rewarded employers by allowing tax deductions, “the fact that the amnesty means the late payment of previously unpaid SG contributions and generous notional earnings outweigh concerns about rewarding employers for ‘wage theft’.”
The Australian Council of Trade Unions (ACTU) has been the most strident in criticising the amnesty as legitimising “superannuation theft”.
The ACTU submission says the Bill would allow “employers who have been underpaying their workers for 26 years to not only escape penalties, but to gain a tax advantage”.
“Rather than taking steps to rectifying the ongoing injustice, the Government, once again, takes the side of unscrupulous bosses who have been ripping off their workforce. The Superannuation Guarantee Charge has been in place for a generation, despite this the Government is claiming that ignorance is a justifiable defence for breaking the law.”