The compulsory employer contribution scheme was introduced in 1992 by the Keating Labor Government. The reform created the Super Guarantee Charge (SGC) obligation and was part of a more comprehensive reform package. The Government’s intent was to ensure the financial future of all Australians and to ease the burden on Australia’s strained welfare system into the future.
Despite this, on the 30th of August 2017 the Australian Taxation Office (ATO) announced that $17 billion in unpaid superannuation was owed to Australia’s workforce. One of the reasons for this was the fact the onus was placed on employees to bring any non-compliance to the attention of their employers or the ATO. Cowed by job insecurity, many are reluctant to rock the boat.
The ATO announced in January 2018 that in response to this extraordinary debt, it was forming a task force to crack down on this non-compliance for superannuation laws and to protect the future of employees.
In support of the task force, in 2018 the Government tabled draft superannuation compliance bills that proposed employers who disobey ATO directions to pay superannuation entitlements be subject to court-ordered financial penalties as well as up to 12 months’ imprisonment. All directors will also be issued a director identification number that will enable the ATO to identify those directors who are not paying employee superannuation.
The superannuation compliance bills also propose making single touch payroll mandatory for all employers from the middle of 2019. Superannuation funds will also be required, from the middle of 2019, to report to the ATO every superannuation payment that is made to every employer.
Other proposed changes include forcing monthly superannuation payments by employers instead of the now required quarterly payments, increased powers to seek court order penalties, encouraging the reporting of non-compliance, and the introduction of a single touch payroll payment system that will give the ATO real-time visibility over wage and superannuation payments.
With the penalties for SGC non-compliance dramatically increasing, it is essential for all employers in the Australian security industry to be fully aware of their compliance obligations. If any of your employees earn more than $450.00 per calendar month, you must, as a minimum, pay each of your employees the SGC, which as at May 2018 is 9.5 percent of their ordinary time earnings. The SGC will increase to 10 percent on the 1st of July 2021 and to 12 percent on the 1st of July 2025.
Research conducted by the Australian Human Resource Institute (AHRI) identified areas where employers mostly trip up. They include:
- Incorrect treatment of contractors – a contractor can still be deemed to be an employee for super guarantee (SG) purposes, depending on the nature of the contractual arrangements.
- Missing payments from the definition of ordinary times earnings when calculating 9.5 percent superannuation contributions, notably the omission of specific allowances and directors’ fees.
- Employers using clearinghouses must ensure that sufficient time is allowed for it to make payments to the appropriate superannuation fund(s) within the 28-day SG obligations are not satisfied on payment to the clearinghouse; they are met when the superannuation fund receives the contributions, with the exception of the Small Business Superannuation Clearing House. Most clearinghouses require up to 10 days to process.
Advice from AHRI is for employers to conduct a review of their processes and payments to ensure they are complying with their legal obligations. For further information on these proposals, it is advised to speak to your solicitor or accountant.