As an employer you have an obligation to make 9.5% superannuation guarantee contributions on behalf of your eligible employees. Generally, you are required to pay super if you pay an employee $450 or more (before tax) in a calendar month.

In January’s Media release the Minister for Revenue and Financial Services said that Super Guarantee non-compliance is a “very serious issue”. The Government has established a new multi-agency working group to investigate and develop practical recommendations to deal with superannuation guarantee non-compliance. The working group will identify the drivers of non-compliance, develop ways to improve compliance and policy options to ensure the law remains fit for purpose for Australia’s $2 trillion superannuation system. The working group was due to provide an interim report to the Minister at the end of January, with a final report due in March 2017.

The Government is also continuing its work with the ATO to protect employees from being ripped off by preventing the practice of deliberately liquidating a company to avoid paying creditors, including employee entitlements, through the Serious Financial Crimes Taskforce and the Phoenixing Taskforce.

The main sources of superannuation guarantee non-compliance are:

1. The employer fails to make mandatory super contribution of behalf of eligible employees;

2. Both the employer and the employee fail to declare salary and wages (known as cash economy);

3. The employer incorrectly identifies a worker as a contractor rather than an employee to avoid its obligations in relation to super contributions;

4. Employer insolvency

Last financial year the Australian Taxation Office (ATO) undertook around 21,000 audits and reviews in relation to super guarantee compliance. These audits and reviews were the result of employees’ reporting to the ATO. According to the ATO’s submission to a Senate inquiry into the impact of the non-payment of the Superannuation Guarantee the top four industries from which reports were received are:

  • Accommodation and Food Services;
  • Construction;
  • Manufacturing; and
  • Retail Trade.

The ATO also noted that the proposed Single Touch Payroll (STP) will streamline the way employers report some tax and superannuation information. There will be no changes to the way employers pay their superannuation. However, when those payments are made to their employees’ funds, the information will be automatically reported to the ATO. The STP will be mandatory for employers with 20 employees or more from 01 July 2018. The Government will make a decision on whether STP reporting would apply for small businesses later in the year.

If you have any questions regarding employer super contributions requirements or you have received a letter from the ATO relating to a superannuation/wages audit please contact our tax lawyers or tax accountants on (02) 9223 9166 or submit an online enquiry form today.