Prison sentences for unpaid super still on the table, but small businesses are already hit too hard by penalties: IPA

Emma Koehn /

The Institute of Public Accountants has hit out at the “draconian” way small businesses can be penalised if they are late to pay workers’ superannuation, warning the the cashflow issues of many small operators must be considered as the government looks to introduce tough new penalties for employers dodging their obligations.

The organisation’s chief, Andrew Conway, says that while there’s no doubt employers should be making “accurate and timely” contributions to staff’s super, the current penalties for late payments mean smaller operators with cashflow concerns are already hit hard by additional fees from the tax office.

Currently, if employers don’t pay their entitlements on time, they can be charged nominal interest and fees on any shortfalls in payments, and can also end up liable for a 200% charge on the superannuation they do owe if they don’t lodge superannuation guarantee statements.

“Some penalties associated with late payments and non-compliance are draconian, to say the least,” Conway says.

The institute’s comments come just days after consultation closed on the federal government’s draft legislation for cracking down on unpaid superannuation in Australia.

The draft bill gives the tax office new powers to chase employers who have not paid correct superannuation entitlements, including the power to issue director penalty notices when super is not paid.

For those who “defy directions” from the ATO to pay up, the tax office is able to take employers to court and seek up to 12 months imprisonment for the breaches.

Conway says “recalcitrant” employers should be hit hard with the new rules, but says that for those who are genuinely having issues paying on time, the current fines help nobody.

“Let’s get human and not tar every business with the same excessive compliance brush,” he says.

However, Minister for Revenue and Financial Services Kelly O’Dwyer has previously asserted that it is never acceptable for Australian workers to not be paid their super entitlements.

The draft legislation also includes provisions to make single touch payroll systems compulsory for businesses of all sizes by July 2019, which the government believes will make it easier for the tax office to track super payments in real time.

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Emma Koehn

Emma Koehn is a former senior SmartCompany journalist.