Number of businesses not paying superannuation up 60% as government considers 12-month compliance amnesty for SMEs

Changes to how long businesses will have to pay their employees superannuation, and the penalties they’ll face if they don’t, are being considered by the government, with statistics from the Australian Taxation Office (ATO) showing the number of business owners who failed to pay their employees’ super has increased over 60% in the past year.

Data provided by the ATO to the ongoing Senate Committee discussing the proposed Superannuation Measures Treasury Laws Amendment Bill showed the number of unique employers who lodged a superannuation guarantee charge statement in the 2017–18 financial year was 17,712; up nearly 60% from the 11,096 employers who lodged them in the preceding financial year.

Additionally, the number of employees who had lodged complaints against their employers also skyrocketed over 56%, from 8,220 in 2016–17 to 12,903 in 2017–18.

The ATO estimated in 2015 that up to 20% of businesses were non-compliant with their superannuation obligations, saying the issue of non-compliance was “endemic, especially in small businesses”.

These revelations come as the government debates a proposed bill amendment that would see employers given a one-off 12-month amnesty to correct historical cases of employee superannuation underpayment or non-payment.

This amendment would “encourage employers to voluntarily disclose historical SG non-compliance and pay an employee’s full entitlement” while allowing them to claim tax deductions for the super contributions during the amnesty period, and, most importantly, have any penalties or fees that would usually apply to non-compliance reduced to nothing.

This is ahead of a bill introduced earlier this year and currently before parliament, which would see the ATO given more power over ensuring the correct payment of employees’ super, including 12-month jail penalties for extreme cases of “recalcitrant” employees.

The amnesty amendment is widely supported by small business groups, with the Small Business Ombudsman Kate Carnell telling the Senate committee her office felt “very positive about this initiative”, and Council of Small Business Australia chairman Peter Strong saying it was an “obvious thing that needs to happen”.

However, both believe some changes to the bill are needed to make it fairer and clearer for small business owners, such as when the 12-month period will begin and making sure SME owners know about the proposed amnesty period.

“We think that it needs to be very clear that small businesses can identify the amount of unpaid super that they’ve got and pay it either in a lump sum or, in agreement with the ATO, over a period of time. We should remember that not too many small businesses have lazy chunks of money sitting in their bank accounts,” Carnell told the committee.

Super an issue for the tax office

Speaking to SmartCompany, Strong said the increase in the number of employers who fail to pay their employees’ super entitlements isn’t surprising; he believes SME owners shouldn’t be asked to control superannuation contributions, saying instead it should be a responsibility of the tax office.

“We know that 95% of SMEs do the right thing, and 5% don’t, so 17,000 isn’t that many in the run of things. But we want what everyone wants to do, which is to take employers out of the collection process,” Strong says.

He believes that super contributions should be lumped in with pay-as-you-go (PAYG) instalments and that employers should then “tell the ATO where to send it”.

“The collection process needs to be simplified. If they took small business owners out of the process, the Senate wouldn’t need to have this inquiry,” he says.

The introduction of the new Single Touch Payroll system from July 1, obligatory for all businesses with over 20 employees, will make it easier for SME owners to comply with super contributions, but Strong believes it will only “make it easier for the honest ones”.

As for the proposed jail time for business owners who continually flout superannuation compliance, Strong isn’t a fan.

“There’s one group in the super collection process who doesn’t get paid, which is the small business owner. They either pay someone to do it, or they do it themselves on Sunday night,” he says.

“The only individual who goes to jail is the one who doesn’t get paid. SME owners shouldn’t be doing it, and we shouldn’t be getting punished for doing a job we don’t get paid for, and gives us no return for our business.”

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