A report to the Assistant Treasurer
Telephone: (02) 8239 2111
Facsimile: (02) 8239 2100
Level 19, 50 Bridge Street
Sydney NSW 2000
GPO Box 551
Sydney NSW 2001
18 March 2010
Senator the Hon Nick Sherry
CANBERRA ACT 2600
I am pleased to present to you my report on findings and recommendations in respect of the review into the ATO's administration of the Superannuation Guarantee (SG) Charge.
The review found that the SG system works well for the majority of Australians, with approximately $71.1 billion in employer contributions being made to superannuation funds in 2008-09. However, this amount includes both mandated SG contributions and salary sacrifice amounts which made it difficult to quantify the level of SG non compliance as a means of determining the true financial impact on employees of non-compliant employers.
The review also found that people most at risk with the current SG system are the employees who are the least empowered or incorrectly classified as 'independent contractors' - and it is these very people who are most reliant upon compulsory superannuation contributions for a higher standard of living in retirement beyond the age pension.
The package of recommendations outlined in my report seek to improve the SG system and its administration to ensure that the administrative framework better supports the underlying SG policy intent and optimises SG compliance through greater detection and deterrence mechanisms. The recommendations also emphasise the nature of employer superannuation contributions as an employee entitlement and seek to improve their protection, especially for those people most at risk. This is to be achieved by:
- Minimising the time period between the non payment of an SG entitlement and the ATO's awareness of it (either being triggered by an EN complaint or the ATO's own pro active work);
- Improving the ATO's ability to proactively identify high risk cases and trigger a compliance response where no employee complaint has been made;
- Improving aspects of the ATO's compliance and debt collection processes;
- Improving the deterrence or penalty effect on those who do not lodge SGC Statements and the delayed or non payment of SG entitlements; and
- Better protection of SG entitlements where an employer becomes insolvent.
Of the seven recommendations and three part recommendations directed to the ATO, they have agreed with nine and disagreed with one. Specifically, it has disagreed with my recommendation that the ATO significantly expands its proactive SG audit work to allow for more real-time monitoring and follow-up of high risk employers who have not paid superannuation.
I offer my thanks to the support and contribution of professional bodies, trade unions, superannuation associations and individuals to this review. The willingness of many to provide their time in preparing submissions and discussing issues with myself and my staff is greatly appreciated. I also thank relevant ATO officers for their professional cooperation and assistance in this review.
Inspector-General of Taxation
© Commonwealth of Australia 2010