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ATO's Super Guarantee Non-Compliance Activities Criticized

by Mary Swire, Tax-news.com, Hong Kong Thursday, May 11, 2017

An Australian Senate inquiry has concluded that the Australian Taxation Office's (ATO's) approach to identifying and addressing Superannuation Guarantee (SG) non-compliance is inadequate.

The Senate Standing Committee on Economics has published the results of its inquiry into SG non-compliance. It said it was deeply concerned by Industry Super Australia's recent analysis, which found that employers failed to pay an aggregate amount of AUD5.6bn (USD4.1bn) in SG contributions in 2013-14, affecting 2.76m employees.

The committee said that the evidence it received "clearly indicates that a failure to adequately detect and address SG non-compliance causes long-term financial detriment to millions of Australian employees, significant competitive disadvantage to compliant employers, and an unnecessary impost to government finances through additional reliance on the Age Pension."

The committee concluded that the ATO's "current reactive approach is problematic," and that the agency should adopt a more proactive stance. The report said the committee was surprised at the ATO's "apparent reluctance to engage with the issue of producing an SG gap," and was concerned about instances of deliberate and repeated non-compliance by employers.

Among the Committee's recommendations were:

  • The ATO should consider more proactive initiatives, such as incorporating random audits into its SG compliance activities;
  • The ATO should prioritize its work on calculating and publishing an accurate, reliable estimate of the SG, and do so annually;
  • The Government should review ATO resource levels to ensure the agency is well equipped to undertake effective and comprehensive SG compliance activities;
  • The Government should investigate options to extend the ATO's private binding advice and administratively binding advice frameworks to make them available to workers as well as businesses;
  • The ATO should improve its communication process with individuals to keep them informed of the progress of their employee notification;
  • The Government should review the current regime and its management by the ATO to determine whether it is adequate;
  • The ATO should review all current compliance and recovery activities related to unpaid SG, to determine which should remain with the ATO and which should be transferred to or shared with the Fair Work Ombudsman;
  • The ATO and ASIC should increase their formal cooperation with superannuation funds to coordinate measures around early detection of SG non-payment;
  • Compulsory superannuation should be categorized as deferred wages that rightfully belong to an employee;
  • The Government should ensure that an employee's voluntary salary sacrificed superannuation contributions cannot count towards the employer's SG obligation; and
  • The Government consider introducing a requirement to pay SG at least monthly.

The ATO has defended its position on SG non-compliance. Deputy Commissioner James O'Halloran said the ATO has over 150 staff focused on SG non-compliance and that the agency examines every report of non-compliance, and, if necessary, undertakes audits and applies penalties. The ATO also has an additional 300 staff who review SG compliance in conjunction with Pay As You Go withholding tax audits.

The ATO further analyzes its data to detect patterns in non-payment and identify high-risk industries, O'Halloran said.

"In 2015-16 we undertook around 21,000 cases that addressed SG non-compliance, raising AUD670m in SG, including penalties, from a range of reviews and audits. Since 2010-11 we have transferred almost AUD2bn in SG entitlements to employees' super funds as a result of ATO action," he explained.

The ATO receives around 20,000 reports each year from people who believe their employer has not paid SG.

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