Government abandons winding back Super Guarantee penalties

Nest egg, superannuaiton, SMSF, retirement
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The Government has voted to remove provisions winding back Superannuation Guarantee Charge (SGC) penalties from its own bill in the House of Representatives.

The Treasury Legislation Amendment (Repeal Day 2015) Bill 2016 has passed the House, but without changes to the Superannuation Guarantee Charge penalties.

The Government and the Labor party moved identical amendments to the Bill, removing the SGC changes, before the Bill was passed by the House.

The original explanatory memorandum to the Repeal Day Bill said “this Bill simplifies the superannuation guarantee (SG) charge and makes the SG charge and penalty more proportionate to the non-compliance”.

The Government had wanted to change the calculation of the Superannuation Guarantee Charge from salary and wages to Ordinary Time Earnings (OTE) – which is how the Super Guarantee is calculated – change the calculation of interest and replace the additional SGC penalty with a general tax penalty.

The Australian Institute of Superannuation Trustees (AIST) called on the Government to abandon the policy, saying it would reduce the cost of Super Guarantee non-compliance to a “trifling amount”.

Labor Shadow Minister for Financial Services and Superannuation, Jim Chalmers, was also critical of the proposed SGC changes.

“In a significant victory for Australian workers and a humiliating back-down for the Assistant Treasurer, the Government has today abandoned its badly-motivated plans to weaken the penalties for employers who do not pay superannuation correctly,” he said, after the Bill passed without the SGC changes.

“Today, the Government has been dragged kicking and screaming to abandon these plans which would make our superannuation system worse, and voted in favour of Labor’s amendments.”

“The chaos and dysfunction of this Government’s economic policy-making is such that Government members were spruiking the SG Charge changes less than half an hour before they were abandoned.”

Treasury Ministers have been contacted for comment.

Update: Based on debate in the House it appears there was a last minute change of mind in the Government to remove the SGC changes from the Bill. Shortly before the amendments were agreed to members of the Government were still arguing in favour of the changes. Nationals member Kevin Hogan said the changes would make the SGC “more proportionate to the noncompliance” and that “the guaranteed charge regime can be very punitive if they inadvertently make small mistakes, and this will be recognised”.

Soon after these comments were made the Minister for Human Services, Alan Tudge, said:

I would like to thank those members who have contributed to this debate. It is disappointing, however, that those opposite would stand in the way of this bill simply because they do not understand how the changes outlined in schedule 1 [the Superannuation Guarantee Charge changes] to the bill benefit business, particularly small businesses. That said, this government will not subject people to needless red tape, which is why the government is proceeding with the other important measures in this bill.

This is despite the Government, obviously, having the numbers in the House. It is possible the changes were dropped to close off a line of attack ahead of the election later in the year.

It should be noted that the Bill still includes changes to allow the ATO to pay certain superannuation amounts directly to individuals with a terminal medical condition.

Dropping SGC changes welcomed by AIST, Industry Super Australia

The Australian Institute of Superannuation Trustees (AIST) welcomed the changes to the Bill, calling the SGC “an important consumer protection measure for superannuation payments to employees.”

AIST CEO Tom Garcia said AIST is very pleased to see common sense prevail.

“The SG charge is necessary to protect employees, and we are pleased to see that Parliament has recognised the important role it plays,” he said.

Industry Super Australia (ISA) also welcomed the removal of the SGC changes from the Bill.

“The purpose of the penalty is to deter employers who do not pay super each quarter as required by law, and unfortunately there is a real need for it,” said ISA CEO David Whiteley.

Mr Whiteley said that the changes would have “significantly” reduced the penalty on non-complying employers. Instead he argues that the SGC penalties should be increased, pointing to statistics that non-compliance with the Super Guarantee rules in 2012 affected around 650,000 Australians.

“Given the size of the problem and the number of workers affected, penalties should be increased. The majority of employers, who do the right thing by their workers and pay the Superannuation Guarantee on time and in full would not be affected.”

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