The government should use the introduction of payday super to update the superannuation guarantee charge (SGC) regime so employees receive lost earnings from unpaid contributions and intentional non-payment of contributions is penalised more severely, according to a collective of industry bodies.
A submission to Treasury from Chartered Accountants Australia and New Zealand, CPA Australia, the Institute of Public Accountants, SMSF Association, Financial Advice Association Australia and The Tax Institute recommended the government proceed with the introduction of payday super but also be aware of the changes it would require.
“The shift to a payday super model represents a significant departure from the current superannuation guarantee (SG) regime and the operation of the superannuation guarantee charge,” the joint bodies said, noting the impact on legislative provisions, employer compliance requirements, payment and reporting processes and tax administration.
“As a result, every aspect of the policy and its impact needs to be carefully considered. Otherwise, there is a high likelihood of significant and unintended consequences that may affect employers’ ability to comply with the payday super model.”
The six professional bodies called for the government to use the change to address deficiencies in the current system by ensuring the model would encourage employers to voluntarily rectify non-payment, underpayment or late payment of SG entitlements, while also compensating employee superannuation accounts for the lost earnings on unpaid SG amounts.
They also requested the payday model is implemented so it reduces compliance costs and uses existing reporting mechanisms, and updates the SGC with a redesigned proportionate penalty system that distinguishes between employers that make an honest mistake compared to those that engage in egregious non-payment of SG obligations.
“The ATO’s latest tax gap estimates for 2020/21 show that the net gap for pay-as-you-go withholding is 1.7 per cent ($3.871 billion) and the SG gap is 5.1 per cent ($3.619 billion),” they said.
“While the majority of employers do the right thing – almost 95 per cent of SG payments that were due were paid – the figures show that more than $3 billion a year of superannuation remains unpaid.
“The difference in these tax gaps demonstrates, among other things, that the current SG regime, including the more severe penalties regime, is ineffective.
“It follows that a well-designed system should appropriately penalise and seek to deter those who are non-compliant, but not discourage employers from self-correcting or disincentivise voluntary disclosures of SG shortfalls.”