In the wake of escalating concerns over unpaid superannuation contributions, the Australian Taxation Office (ATO) has estimated a staggering $3.4 billion in unremitted superannuation annually. The government, determined to address this issue, is set to unveil strategies in the upcoming May federal budget, directing the ATO to aggressively pursue the billions owed to workers. Assistant Treasurer Stephen Jones underscores the severity of non-compliance, equating it to wage theft, and emphasises the importance of instilling awareness among businesses regarding their obligations.
Government Initiatives and Recommendations:
Assistant Treasurer Stephen Jones contends that while penalties play a role in addressing non-compliance, the government's priority is preventing the occurrence of unpaid superannuation in the first place. A recent Senate inquiry recommended an array of measures, including enhancing proactive superannuation guarantee initiatives, intensifying penalties for deliberate non-compliance, conducting random audits, and transparently publishing enforcement activities related to superannuation guarantee payments.
Challenges Faced by Employers:
Contrary to intentional misconduct, our observations indicate that a significant number of employers grapple with confusion over superannuation requirements rather than deliberately underpaying their employees. Key challenges include properly identifying individuals considered "employees" under the extended definition in the Superannuation Guarantee (SG) Act, distinguishing between employees and contractors, recognising workers primarily providing labour, and understanding specific inclusions related to payments within the realms of entertainment and sports.
Key Issues Identified:
The primary stumbling blocks for employers involve correctly identifying workers, determining ordinary times earnings, and understanding the nuanced definitions under the SG Act. Specific areas of concern include distinguishing between employees and contractors, recognising workers predominantly involved in labour, and understanding the intricacies of payments to individuals in entertainment and sports.
Recommended Actions for Employers:
To navigate the evolving landscape of superannuation compliance, employers are advised to:
- Understand when payments to workers and contractors trigger superannuation guarantee contributions.
- Familiarise themselves with extended definitions, recognising that superannuation guarantee liabilities may arise from payments such as honorariums.
- Gain clarity on the components to be included or excluded from ordinary times earnings.
Proactive Measures:
Historically, issues with compliance surfaced when workers reported incorrect remittances to the ATO. However, a notable shift in approach is evident, with the ATO adopting a more proactive stance. Unions and employee organisations are also actively engaged in ensuring timely and accurate superannuation payments. The Commissioner's release of Practical Compliance Guide PCG 2023/2, titled "Classifying workers as employees or independent contractors - ATO compliance approach," emphasises the importance of undertaking comprehensive risk reviews of payroll and superannuation guarantee compliance.
Conclusion:
As the government intensifies efforts to crack down on unpaid superannuation, businesses must proactively review their payroll practices and ensure compliance with the evolving legislative landscape. By understanding the extended definitions, identifying potential liabilities, and staying informed about regulatory changes, employers can navigate the complexities of superannuation requirements, fostering a fair and equitable working environment for all.
Contact Moore Australia today to get help with your Superannuation compliance.