Controversial new laws that will encourage employers to dob themselves in for failing to pay superannuation have been greenlighted by a Senate Committee, which has called on the tax office to advertise the scheme to ensure its success.
Introduced in its current form back in September, the Recovering Unpaid Superannuation laws will offer small businesses an opportunity to avoid penalties if they admit to super theft, provided they back-pay what workers are owed, including interest.
Under superannuation guarantee laws, employers are required to pay 9.5% of an employee’s ordinary time earnings into a complying super fund at least four times a year, due quarterly.
But about $2.3 billion worth of those payments weren’t made in the six years between 2011-12 and 2016-17, according to Australian Taxation Office (ATO) estimates.
In a bid to reduce the size of the superannuation gap, the federal government wants to provide small businesses with an opportunity to rectify non-compliance in their own businesses by self-reporting wrongdoing.
But the reforms are controversial, with Labor senators criticising the laws as “poorly conceived”.
Arguing amnesty is “ineffective” in reducing the super gap, Labor senators said the changes would create a “double standard” that renders employer theft acceptable and rewarded.
“This bill would not penalise wage theft — instead, it would reward it by allowing employers to make deductions,” they said.
“Furthermore, it punishes employers who are doing the right thing, by allowing their competitors to gain a competitive advantage through non-compliance.”
Nevertheless, the Senate Economics Legislation Committee, chaired by West Australian Liberal Senator Slade Brockman, recommended the Bill be passed last week, setting the stage for a stand-off between the major parties.
The committee said it was “cognisant of perceptions” that employers who have failed to pay workers their superannuation money have “potentially benefited” from breaking the law, with penalties absolved of under the changes.
“Accordingly, to best ensure the success of the amnesty, the committee recommends that the ATO develop and implement a communication strategy to maximise employer awareness and engagement with the superannuation guarantee amnesty,” the committee said.
This is the second time the federal government has tried to pass the amnesty legislation through Parliament. Originally announced in May 2018, the first iteration of the reforms would have run for a year through to May 2019.
Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, said in September 7,000 employers voluntarily disclosed historical unpaid super in the wake of the initial amnesty scheme being announced.
“The ATO estimates an additional 7,000 employers will come forward due to the extension of the amnesty,” Hume said in a September statement.
“This means around $160 million of superannuation will be paid to employees who would otherwise have missed out.”
Peter Strong, chief executive of the Council of Small Businesses Australia (COSBOA) agrees the legislation should pass acknowledging firms who haven’t played by the rules have received a competitive edge.
“If you’ve been afraid to nominate then do it,” Strong tells SmartCompany.
But the COSBOA chief wants the government to take a broader look at superannuation law in Australia, arguing it unfairly disadvantages small businesses in general.
“We have to acknowledge what a vested and inefficient system we have,” he says.
“We collect money for multi-billion dollar financial institutions and we get fined if we don’t.”
Have you underpaid superannuation? Will you be making use of the amnesty? Get in touch (anonymously if you prefer) and tell us why.