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Superbad? Government targets Superannuation Guarantee non-compliance

Posted by: The ADP Team on 3 August 2017 in Compliance, Finance

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Employer obligations and taxation legislation were a significant focus for the 2016-17 financial year – and we’re set to see a continuation of the theme across this year. As changes to Working Holiday Makers taxation rate, 457 visas and minimum wage come into effect, we’re also seeing more attention on reforms such as, accessorial liability and most significantly…  superannuation guarantee (SG) non-compliance.

Billions in unpaid SG contributions raises a red flag

For those of you who may not follow the activities of Parliament and Senate Committees quite as avidly as I do, here’s a quick catch-up. A recent review by Industry Super Australia found that employers failed to pay an aggregate amount of $5.6 billion in SG contributions in the 2013-14 financial year. This prompted a Senate Economics Committee review into SG non-compliance. The Committee heard from many witnesses across Government, superannuation funds and other industry stakeholders via a number of hearings.  

ADP was invited to be a Hansard Witness at the Senate Economics Hearing in Canberra on 3 March 2017 and in addition to that, we lodged our own submission with the Committee. You can read ADP’s submission (#69) along with all other submissions which are published on the Parliament’s website.

Based on all the evidence presented in the hearings and the submissions, the Committee created a detailed report. As proof that a sense of humour lightens even the most challenging endeavour, the report was titled: “Superbad – Wage theft and non-compliance of the Superannuation Guarantee.”

The way superannuation contributions are considered needs to be reviewed

There were a total of 32 recommendations proposed by the Committee. Surprisingly, a significant number of the recommendations would involve legislation change and fairly fundamental changes to the way the SG system is currently administered. Some of the recommendations that I found particularly interesting are captured in the table below.


Superannuation Guarantee infographic image


That the Government considers amending the SGAA to remove the $450 minimum monthly threshold.


Amend the SGAA to ensure that an employee’s salary sacrificed superannuation contributions do not count towards the employer’s compulsory SG obligation and do not reduce the calculated Ordinary Times Earnings (OTE) amount.


Amend the SGAA to require SG be paid at least monthly, but preferably in alignment with regular payroll cycles.


Review the definition of OTE and examine the wider implications of any changes.


Amend the SGAA to extend the liability provisions pertaining to unpaid SG to include corporate entities. This is similar to the accessorial liability provisions for franchisors and holding companies that Fair Work is proposing in the Fair Work Amendment (Protecting Workers) Bill 2017.


Review and strengthen the ATO’s current ability to recover SGC liabilities though the Director Penalty Notice (DPN) framework in order to stop company directors undertaking fraudulent phoenix activity and avoiding their SG liabilities.


That APRA should revise the disclosures on the Member Contributions Statements, including a break-down of the classifications between the different types of superannuation contributions that the employee received from each employer.


That that Government should: make Single Touch Payroll (STP) mandatory for all size of employers; support employers’ transition to STP and consider mandating payday payments, in addition to the payday reporting.


Amending the Fair Work Regulations 2009 to include;

  • the amount of earnings that the SG is calculated on;
  • any voluntary superannuation contributions due;
  • compulsory SG due; and
  • all amounts of superannuation (both voluntary and compulsory) paid into an employee’s superannuation fund (rather than just the amounts accrued).

These 10 recommendations are clear indicators that Government is being prompted, almost pressured, to revisit the way superannuation contributions are considered. The Committee in their introduction, clearly aligns superannuation contributions with ‘deferred wages that rightfully belong to the employees.’

The impact of SG non-compliance impacts many key stakeholders, the most obvious being employees. Not only do the employees not receive their rightful entitlements, but they miss out on timely investment opportunities which impact the amount of savings they take into retirement. A direct correlation to employees not having an adequately self-funded retirement is an increased reliance on the age pension system and the Government and tax payers who fund it.

The report and the recommendations also acknowledges that STP is going to be a game changer. It will provide added transparency in respect of SG liabilities of employers – and the timeliness of the payments being made to extinguish those liabilities.

Complexity impacts superannuation guarantee compliance

I absolutely support 100% compliance for SG but I’d like to share a key learning gained by working with business of all types and sizes for many years. Most employers want to do the right thing by their employees but the sheer complexity of SG means that while many think that they are compliant, they are making mistakes. The reality is that a large proportion of employers in Australia are not engaged in phoenix activity or plotting to rob employees of their entitlements. I honestly believe that most are just trying really hard, despite all the business and personal challenges they face, to sustain a successful operation that contributes to our economy.

Keeping this in mind, it is absolutely crucial that there is more transparency, that employers are better educated and that the legislation and guidance is made to be as simple as possible.

Initiatives such as eliminating the minimum earnings threshold and paying SG from the first dollar of salary and wages earned may go some way in simplifying the rules. We also need to consider that this is not just an amendment to the SGAA, but also to many of the industrial awards and agreements which stipulate when SG is payable and how it should be calculated.

A collaborative effort is required for sustained change

The change management piece should not be underestimated and there is no quick fix. SuperStream and STP will go a long way in encouraging compliance, giving the Government accurate data about the fulfillment of employer’s obligation and what is flowing through the superannuation system.

Default super funds, now more than ever, need to play a key role in assisting their employers but also in reporting to the ATO much more frequently than just in the one ‘Member Contribution Statement’ per annum.

This problem does not fall squarely on the shoulder of one group. As a payroll solutions provider we recognise that even we play a role in helping our clients better understand their employer obligations.  We all need to address this issue collectively to ensure compliance for all stakeholders involved. 

Written by: Angela Lehmann, Legislation Manager (Payroll & Tax), ADP Australia and New Zealand

Click to learn how ADP clients utilise our electronic payment service to remove the risk and complexity of payroll disbursements, including superannuation, PAYG tax and third party payments such as, child support and health insurance premiums. With a 20-year history in moving funds across the world and a Aa credit rating from Moody’s, as well as, a AA from Standard & Poor , we are well positioned to support businesses of all sizes process their payroll and manage disbursements cost-efficiently, accurately and on-time.


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