Government plans to close superannuation salary sacrifice SG loophole

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The Government has announced plans to close a loophole which allows employers to claim salary sacrifice superannuation contributions against their Super Guarantee obligations.

“The Government will seek to legislate a key recommendation of the Superannuation Guarantee Cross‑Agency Working Group to close a loophole that could be used by unscrupulous employers to short‑change employees who choose to make salary sacrifice contributions into their superannuation accounts,” said a statement by Minister for Revenue and Financial Services Kelly O’Dwyer.

The Minster says the Government plans to introduce such a Bill to Parliament this year.

“If Australians are to continue to have confidence in the integrity of the superannuation system, we must ensure employers are paying workers their full entitlements, whether they are wages or superannuation,” said Minister O’Dwyer.

This was one of the recommendations in the Superannuation Guarantee Cross‑Agency Working Group report, which the Minister also released. The Working Group comprises representatives from the ATO, ASIC, APRA, Treasury and Department of Employment. The report was given to Government at the end of March, but has only now been publicly released.

In January 2017 Minister O’Dwyer announced that the Group had been meeting since December 2016. On 1 December a Senate Committee had commenced an inquiry into Superannuation Guarantee Non-Payment. One of the recommendations in the final report from the Inquiry was to amend the relevant Act to ensure salary sacrificed super contributions cannot count against employer’s compulsory SG obligations or reduce the base on which SG is calculated.

Releasing the report, Minister O’Dwyer said: “The Government is carefully considering the remaining recommendations made by the Working Group report to ensure that any measures progressed will improve compliance without unduly burdening employers.”

Some of the other recommendations in the report include requiring super funds to report super contributions to the ATO more frequently and changing secrecy provision to allow the ATO to inform employees of its actions to collect their SG.

However the report also recommends a more “flexible” penalty framework, to “appropriately deal with the spectrum of employer culpability in non-compliance”.

This could be similar to the changes the Government proposed to SG penalties in 2016, which Labor referred to as a weakening. The Government included the changes in a Bill to Parliament but amended its own Bill to remove them before it passed the House.

Labor says the Government lacks a comprehensive strategy to deal with unpaid superannuation.

“Seven months of doing nothing on unpaid super, despite a detailed report sitting on the minister’s desk for that entire time, has resulted in a media release from the Turnbull Government which only promises to take action on one aspect of the issue at some point later this year,”  said a statement by Shadow Minister for Small Business and Financial Services Katy Gallagher.

“In a response that can only be described woefully inadequate the Minister’s ‘announcement’ doesn’t go anywhere near far enough to protect workers who will continue to miss out on billions of dollars in unpaid super payments each year.”

“In the time that Kelly O’Dwyer could have actually done something to address this super rip-off, a Labor instigated Senate Inquiry into unpaid super made 32 recommendations, one of which was to deal with the loophole which allows employers to reduce their compulsory super contributions when employees salary sacrifice into super.”

Industry Super Australia also criticised the announced change as not going far enough, as it will only help one in ten of the people affected by unpaid superannuation.

“Every month that passes without a comprehensive solution to unpaid super millions of Australians are being shortchanged on their retirement savings,” said Industry Super Australia public Affairs Director, Matt Linden.

Mr Linden said the ATO still hasn’t come to grips with the problem, “despite having the best data available to identify individual taxpayers at risk of underpayment” and that there seemed to be an “inadequate emphasis being placed on the key measures really needed to tackle the problem”.

“Amending the law to require employers to pay super more frequently – at least monthly but ideally at the same time as wages –  is essential to stop super payments being used for business cash flow,” he said.

“Also essential is a policy decision from Government to include small businesses in Single Touch Payroll to enable real time tracking of payments, and collection of ordinary time earnings data to verify amounts paid are correct.”

“Without taking these extra steps millions of Australians will continue to be shortchanged billions in super, with the Government having to pick up the tab with higher age pension costs.”

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1 comment

  1. The ATO ‘s failure to move on a 20 year old problem leaves you to think it was driven by the Deputy Commissioner….??????????????

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