ATO focus extended to superannuation guarantee non-compliance

Tax Insights

The Australian Government has announced increased funding for the ATO in order to focus on employer underpayments of compulsory superannuation contributions.  

This can be seen as the next step in aggressive revenue raising initiatives, following high profile ATO action against multinationals, high net wealth individuals and the cash economy.  Apart from extra funding, there are a number of changes proposed.  

The announcement also comes on the back of the ATO’s recent release of its estimate of the Superannuation Guarantee (SG) Gap (the difference between SG contributions required under law and those actually made).
The ATO estimates that the SG Gap for the 5 years to 2015 was $2.85 billion.


What does this mean?

The ATO's recent release of its superannuation guarantee gap is estimated to be $2.85 billion.

Until now, the ATO’s SG compliance activities have been reactive in nature, often responding to complaints from disgruntled employees.  The announcement makes clear the ATO is proposing to adopt a much more proactive approach, which can lead only to increased costs for employers – even those who are fully compliant. 

‘Hot Spots’

The Government has stated that particular entities are considered to be ‘hot spots’ for SG non-compliance.  These are small businesses in the accommodation, food services, construction and retail sectors.  We would add that any entity using contractors is also at risk.

Reforms Announced

The package of reforms announced includes measures to:

  • Require more frequent reporting of superannuation contributions by superannuation funds to the ATO (this will now occur monthly)
  • Streamline SG reporting within the new Single Touch Payroll process
  • Increase the ATO’s recovery powers by strengthening director penalty notices and using security bonds for deemed ‘high-risk’ employers
  • Giving the ATO the ability to seek court-ordered penalties in the most serious cases.

What does SG Compliance action involve?

The ATO takes SG compliance very seriously.  Where an employer is found to have a SG shortfall, it is subject to the Superannuation Guarantee Charge for each affected employee for each affected quarter.  The Superannuation Guarantee Charge is managed by the ATO, and includes 3 elements:

  • The superannuation shortfall amount (levied on the broader base of salary and wages, rather than ordinary time earnings)what are the implications for superannuation guarantee?
  • Nominal interest at 10% per annum from the start of the shortfall quarter to the date of disclosure to the ATO
  • An administration fee of $20 per affected employee per affected quarter.

In addition, payment of the Superannuation Guarantee Charge is not tax deductible for employers. 

On top of this, the ATO can levy penalties of up to 200% where an employer’s SG obligations are not met.

Unlike other tax audits and investigations, the period of review for superannuation is theoretically unlimited, such that the ATO could request records back as far as 1992 when Australia’s superannuation regime came into being
The message is this can be a costly exercise! 

How can RSM Australia help?

RSM Australia can assist by:

  • Reviewing your Enterprise Bargaining Agreements and Employment Awards to determine which payments are subject to superannuation and which are not
  • Reviewing your compliance with Australia’s SG legislation
  • Calculating SG shortfall amounts and the Superannuation Guarantee Charge
  • Working with the ATO on disclosures required and negotiating the application of penalties.

Please contact your local RSM office to discuss how we can assist your business in light of this announcement.

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