Written by Workforce chief journalist Paul Karp.
Exclusive: The Australian Tax Office and Treasury Department have proposed an amnesty to business and superannuation stakeholders that would see employers who dob themselves in for failing to pay workers’ superannuation let off the hook for penalties.
Workforce Daily can reveal the govt agencies met stakeholders on Monday (August 24) to propose an amnesty whereby businesses who owe unpaid superannuation could avoid penalty if they pay arrears in full with interest. Attendees were told the agencies estimate up to 650,000 Australians are owed super in arrears.
The figure echoes the result of a superannuation non-compliance report for industry super funds by Tria investment partners, which found 650,000 Australians were affected by superannuation guarantee non-compliance, or 6.5% of the workforce. Affected workers lose an average $3,750 a year, costing a total of about $2.5bn a year.
Australian Chamber of Commerce and Industry (ACCI) economics and industry policy director John Osborn told Workforce Daily the peak employer body was among those consulted on Monday. Industry Super Australia and several super funds were also present.
Amnesty will help recover payments: ACCI
Osborn said ACCI “supports a temporary amnesty on super payments for small businesses to help them come up to speed where they’ve fallen behind”.
“The current regime of penalties [is] harsh and can discourage particularly small businesses from coming forward and catching up.”
Employers who fail to pay super are required to lodge a superannuation guarantee charge (SGC) and to pay an amount equal to the contribution, plus 10% interest a year plus an administration fee of $20 per employee. Unlike a super contribution, amounts paid under SGCs are not tax deductible.
Failure to lodge a SGC or to provide information to an audit can double the penalty. Employers may also be liable for fines of up to $5400 for individuals convicted of failing to keep super records, and various other administrative penalties.
The Federal Government has flagged plans to “simplify and reduce the severity” of the SGC in response to Board of Taxation recommendations it be redesigned as it was “unnecessarily harsh”, often with “disproportionate outcomes”, and “very limited discretion” (WF 23/01/15).
Osborn said an amnesty would still require businesses to pay “full entitlements including interest” but would “encourage businesses to come forward and be assisted through the process of coming fully up to date with their obligations”.
Osborn said penalties for super arrears didn’t allow much discretion for businesses who were nevertheless “trying to do the right thing”.
He argued penalties fail to recognise “all the circumstances facing employers” including difficult economic conditions and very constrained cash flow.
Osborn said ACCI was “happy to work with the govt” to get an amnesty off the ground and “we’ve had encouraging signs that this is an area where we may be able to reach agreement”.
Employers should pay up on time: ISA
An Industry Super Australia (ISA) spokesperson told Workforce Daily “there is no excuse for employers not paying their employees super”.
“While most do the right thing, for those that don’t, it diminishes employees’ super savings and is a significant revenue cost to government,” he said.
The spokesperson said the ATO was “taking the issue more seriously and has been engaging constructively with industry and employers on ways to address gaps in compliance activity and more proactively identify when [super] isn’t being paid”.
He said “an amnesty of some type” was discussed in broad terms at Monday’s meeting “however there were issues raised about the equity and effectiveness” of such a scheme.
“Ultimately the issue of unpaid super would be significantly reduced if super contributions were required by law to be paid at the same time as other wage and salary income, as increasing numbers of employers voluntarily do.”
The ATO and Treasury did not respond by presstime.
(This story first ran in Workforce Daily, August 27, 2015)
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