Labor wants Salary Sacrifice SG ‘loophole’ closed retrospectively

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Labor is in favour of closing a Salary Sacrifice ‘loophole’ retrospectively from 1 July 2019, though it is unclear if this will be legislated.

A Bill is currently before the Parliament which would, amongst other measures, stop employers from being able to count the Salary Sacrifice contributions of their employees against the (employer’s) Super Guarantee obligations.

The Government announced the change to close this ‘loophole’ in July 2017. Super Consumers Australia have pointed out that the so-called loophole was acknowledged in a 2006 ruling by the ATO.

Changes to how Salary Sacrifice was treated for Super Guarantee was included in legislation introduced to Parliament in September 2017, but also in the Bill was the more contentious changes to super choice – and so the Bill stalled in the Senate.

But earlier in 2019 a Bill was introduced (the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019) with the Salary Sacrifice change, but not the super choice measure. A Senate Committee has been conducting an inquiry into the new Bill, and now given its report.

The report notes that the “majority” of submission were supportive of the Salary Sacrifice change, “arguing that it was an injustice for this ‘loophole’ to exist”.

The main issue of debate was the start date for the change – as drafted, the Bill has the change applying to quarters starting 1 July 2020 and going forward. But the Institute of Public Accountants (IPA) argued that it should start 1 July 2019. The IPA told the Committee, in its public hearing, that the July 2020 start date meant: “…effectively, is that employers have had more than two years notice that this does not fit in with the intent of the policy. We’re basically legalising SG theft by allowing this to continue to occur until the start of the next financial year. We believe that that is wrong on a number of principles.”

Treasury told the Committee that the delay was needed so payroll providers could update their software, which was accepted by the majority of the Committee.

However the Labor members of the Committee support the views of the IPA, and recommend that the implementation date of the Salary Sacrifice change be “amended to 1 January 2020, but to be retrospectively in effect from 1 July 2019”.

“Labor Senators cannot support the effective ‘legalising of theft’ if this bill is passed, but not implemented until 1 July 2020.”

It is unclear as yet if Labor plans to move amendments to this effect. No amendments have been moved so far.

The majority report of the Committee, along with additional comments by Labor and Centre Alliance, raised concerns about schedule 5 of the Bill – which allows the ATO to disclose business tax debt information to credit reporting bureaus – so there may be other amendments to the Bill. But given the Bill isn’t opposed by the Coalition or Labor it appears likely to pass. The draft Senate program has the Bill up for debate on Tuesday.

The Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019 is also scheduled for debate in the Senate, on Thursday. It would would allow high income earners with multiple jobs to opt-out of super guarantee, include LRBA balances in the calculation of Total Super Balance, and make changes to the Non-Arm’s Length Income rules.

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