Jail for SG non-compliance Bill likely to pass with support of major parties

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A Bill to introduce potential prison sentences for Superannuation Guarantee non-compliance appears likely to pass with the support of, at least, the Liberal and Labor parties.

The Government has a Bill before Parliament which would allow the ATO to direct an employer to make a payment of Superannuation Guarantee Charge. Failing to comply could be penalised by 12 months’ imprisonment or a fine, or both.

The Bill also extends Single Touch Payroll requirements to small employers – 19 and fewer employees – from 1 July 2019, among other changes.

The Bill seems likely to easily pass the Parliament, as it has the support of the Liberal and Labor parties according to the report of a Senate Committee inquiry.

Update: the Bill is, currently, set for debate in the House of Reps on Wednesday 20 June, according to the Draft Legislation Programme. The Bill is then scheduled for debate in the Senate on Thursday.

“The majority of submissions observed that action was needed to address superannuation guarantee non-compliance and voiced support for the Superannuation Guarantee Integrity package. However, there were differing views on whether the measures in the bill went far enough, or indeed too far, in their attempt to address the issue,” says the report of the Senate Standing Committee on Economics.

According to the report, Minister for Revenue and Financial Services Kelly O’Dwyer has been asked, by a different committee, for a “detailed justification” of the up to 12 months’ jail sentence.

The Tax Institute says that imprisonment as a penalty for SG non-compliance is “not justifiable”. Chartered Accountants Australia and New Zealand said in their submission that courts will be “extremely unlikely” to impose such a penalty, and so it would be better it was removed from the Bill.

Both the Tax Institute and CAANZ questioned if employers would be ready for the Single Touch Payroll start dates.

“We considered that many SMEs will be ill-equipped and not ready by the proposed dates since they have not been adequately informed and educated. Further, even when they are informed, SMEs are unlikely to be able to roll-out new and often expensive software systems by the proposed dates,” said the Tax Institute, in its submission.

“The Government should also provide a tax incentive for SMEs to upgrade software and obtain training to comply with these proposed changes.”

Minister O’Dwyer had announced a $100 tax offset for small businesses to help pay for Standard Business Reporting software. But this was dropped in late 2017.

“We did not find the draft explanatory memorandum helpful in setting out what the STP changes are actually meant to achieve. We hope in time further information can be provided before this legislation completes its legislative passage,” said CAANZ, in its submission.

The Labor Senators on the Committee said they “broadly support” the measures in the Bill, “but continue to reiterate that the Government is slow to action on unpaid super and has a lacklustre approach to enforcement”.

The Greens recommend that the Bill also include the removal of the monthly $450 threshold to receive Super Guarantee, and for SG to be paid on the shorter of monthly or as part of the pay cycle.

The Government also has a Bill before Parliament which would create an amnesty for employers who have underpaid Super Guarantee.

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