Compliance, Contributions, Legislation, Superannuation

Payday super needs new penalty regime

Superannuation guarantee Contributions SG Payday super IFPA

Government plans to align super contributions with salary payments should be accompanied by a progressive penalty system.

A government plan for employers to pay superannuation guarantee (SG) contributions at the same time as salaries is a good move for employees, but should include a graduated penalty system to prevent undue punishment for those that face unforeseeable delays in making contributions.

The Institute of Financial Professionals Australia (IFPA) said the introduction of payday SG payments, which was announced earlier this year, would result in greater compliance in the superannuation system, but should use a ‘pay-date’ model rather than a ‘due-date’ model.

In a submission to Treasury on the change, IFPA noted a pay-date model would require employers to make SG contributions on the day salary and wages are paid, not when the contributions should arrive in a super fund a few days after payday.

“The benefit of a pay-date model is that it would facilitate the objectives of the payday legislation better as employers will see the payment of SG as a usual and expected part of paying salary and wages,” IFPA head of superannuation Natasha Panagis said.

The body noted it had identified scenarios in which a superannuation benefit, even when submitted on time by an employer, could still arrive beyond the anticipated SG payment window as per the proposal. These delays might be attributed to factors beyond the employer’s control, such as bank transfer or superannuation clearing-house processing delays.

To address this concern, IFPA proposed the implementation of a tiered penalty system that distinguishes between employers with a repeated pattern of delayed SG contributions and those that have met their obligation to pay superannuation benefits on schedule, but encounter delays beyond their control in the receipt of those benefits.

“We recommend the government introduce a graduated penalty regime that is lenient on infrequent late-paying employers and is harsh on deliberate non-paying employers. This could be based on the income tax regime. For example, 25 per cent for failure to take reasonable care, 50 per cent for recklessness and 100 per cent for deliberate non-payment,” IFPA superannuation technical and policy committee chair Phil Broderick said.

“This change will see late-paying employers not being overly penalised or slugged by late payment penalties as compared to non-payers. Rather, the penalty for late-paying employers is proportionate and reasonable.”

IFPA’s submission also proposed a change in the treatment of late contributions, suggesting employers incur interest charges instead of the current practice of receiving an SG charge assessment. Under IFPA’s model, these interest charges and late payment penalties would also be eligible for tax deductions.

The deadline for submissions on the government’s “Securing Australians’ Superannuation” consultation paper was 3 November.

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