Superannuation salary sacrifice loophole changes “too weak”

Proposed legislative changes to close a superannuation salary sacrifice loophole are “too weak to be effective”, says Industry Super Australia.

The Government has announced it intends to legislation to close a so-called loophole allowing employers to count the salary sacrificed superannuation contributions of their employees against their Super Guarantee obligations.

However Industry Super Australia (ISA) says the changes are too weak because they don’t include other recommendations, from the Superannuation Guarantee Cross Agency Working Group, dealing with the major causes of underpayment of super.

“The Government’s moves to remove the salary sacrifice loopholes are very welcome, but they only address 16% of the problem,” says ISA, referring to the proportion of superannuation underpayment accounted for by the salary sacrifice loophole.

ISA makes a number of recommendations to the Government, including:

  • extending Single Touch Payroll to employers with 19 or fewer employees
  • monthly payment of Super Guarantee
  • removing the $450 monthly threshold for Super Guarantee
  • more and better information sharing between the ATO, Fair Work Ombudsman and ASIC
  • amend the Corporations Act to allow employee entitlements to be recovered with priority from insolvent trustee companies
  • new civil penalty provisions
  • law changes to allow the corporate veil to be pierced in particular circumstances

AIST, the Australian Institute of Superannuation Trustees, welcomes the draft legislation and calls for the changes to be implemented “without delay”.

“Whilst we admit to some disappointment that this cannot be implemented any earlier than July 2018, we enthusiastically recommend its passage through Parliament and applaud the commitment the Government has displayed with respect to this legislation.”

However AIST says there are still issues around the definition of Ordinary Time Earnings (OTE), and other amounts that may not be included in the salary amount, including reportable fringe benefits.

“AIST believes that a more elegant solution to these problems would be to make the SG payable on gross remuneration. This avoids complex formulae and ensures that employees’ mandated retirement savings is calculated the way that it is intended.”

The Association of Superannuation Funds of Australia (ASFA) “strongly” welcomes the proposed changes to the Salary Sacrifice rules. However ASFA would also welcome further action by the Government in addressing Super Guarantee non-compliance, including the payment of SG monthly, more resources for the ATO and removing the $450 monthly threshold.

“We urge the Government to consider these measures, and the remaining recommendations of the Working Group, to develop a comprehensive policy response to the issue of SG non-payment.”

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