The Government has announced it will extend its director penalties regime to crack down on directors of companies that fail to make super guarantee payments on behalf of employees.
The announcement comes after the Inspector General of Taxation, Ali Noroozi, found there are currently at least $600 million worth of super guarantee payments outstanding, although the number could be much higher.
“Employers that do not pay SG obtain an unfair advantage over other compliant employers that meet their SG obligations and pay employees’ superannuation on time,” the report says.
The report found employees in micro businesses, employees of micro businesses, younger employees and employees who have been incorrectly labelled as independent contractors were most at risk of missing out on payments.
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In addition, workers in the arts and recreation sector, the transport, postal and warehousing sectors, the accommodation and food services industry and the agriculture, forestry and fishing sector were at risk.
Noroozi also found there was a typically a gap of up to two years between when a super shortfall arises and the non-payment is reported by the employee, which makes it hard for the Australian Taxation Office to indentify payment shortfalls and can make it harder to recover outstanding amounts if the businesses involved become insolvent.
Noroozi made 12 recommendations designed to improve the identification of super guarantee shortfalls by the ATO, and to enhance the ability for the ATO to proactively indentify businesses that could potentially breach their super payment obligations through improved data matching.
He also recommended the ATO be given improved powers to prosecute breaches of super payment obligations, and an extension of the director penalty regime to apply to unpaid super.
Assistant Treasurer Bill Shorten has announced the Government will take up Noroozi’s proposal.
“The Inspector-General was of the view that if a company fails and owes superannuation to employees, then the directors of the company should be made strictly liable for the unpaid superannuation liabilities of the company,” Shorten said in a statement.
“This will act as a strong deterrent against employers not paying superannuation and also discourage phoenix practices.”
Shorten also said the Government has already introduced a package of reforms designed to give workers better oversight of their super payments, including requirements that information about super payments be added to pay slips, and quarterly reporting from super funds to their members showing whether payments have been made.
Superannuation spokesperson for the Institute of Chartered Accountants, Liz Westover, also backed the Inspect General’s recommendations.
“I think there are some great outcomes in there for Australians saving for their retirement,” she told SmartCompany.
“I think we do have to make sure employers meet their obligations, then extending the director’s penalties regime is one way to do that.”
However, she says she is pleased to see Noroozi has taken into account that there may be “unintended consequences” that prevent employers from making payments.
Westover also supports moves to increase the amount of information employees are getting about super payments.
“The provision of greater, timelier information to employees is great. We just need to balance that so we are not putting undue compliance burden on super funds and employers.”