For the first time, the Australian Taxation Office (ATO) has released its estimate of the Superannuation Guarantee (SG) gap. The gap is the difference between the theoretical amount payable by employers to be fully compliant with their SG obligations and actual contributions received by funds. The ATO estimates the net SG gap to be 5.2% or $2.85bn of the total estimated $54.78bn in SG payments that employers were required to pay in 2014-15.

Deputy Commissioner James O'Halloran commented on the findings as follows: 'While this analysis shows that 95 per cent of the estimated superannuation guarantee is paid to employees, the gap exists because some employers appear not to be meeting their super guarantee obligations either by not paying enough or not paying it at all. Superannuation has a vital role in providing for people’s retirement, and any non-payment is of concern'.

ATO comments on the findings:

• Credibility of the figures: The ATO states that it worked closely with tax gap experts, other government departments, overseas tax administrations and industry stakeholders in developing and validating the gap estimate and quotes ATO deputy Commission James O'Halloran as stating: 'As a result of this rigorous assurance process we are confident that we have an estimate that is reliable and credible'.
• Insight into effectiveness of current strategies: Deputy Commissioner O'Halloran comments that 'Undertaking an estimation of the Superannuation Gap will provide a useful insight into the operation of the superannuation guarantee system and allow the ATO to assess the effectiveness of our strategies to reduce the level of non-payment of superannuation guarantee.'

   

• Ongoing monitoring: The ATO now meets on a quarterly basis with Australian Prudential Regulation Authority, Australian Securities and Investment Commission and the Fair Work Ombudsman to monitor the operation of the superannuation guarantee system.

   

• Increased focus: ATO Deputy Commissioner, James O'Halloran stated: 'We [APRA] are increasing our proactive SG case work by one third this financial year. We have improved our analysis of data to detect patterns in non-payment, and are working more closely with other government agencies to exchange information'. APRA adds that, the Single Touch Payroll will further improve visibility on reporting and simplify tax and super interactions for employers, allowing the ATO to better identify non-compliance over time.

   

The ABC writes that Deputy Commissioner O'Halloran has said that employers who either knowingly or unwittingly hold back superannuation will now face tougher scrutiny and penalties and warning that payment of superannuation is a priority for APRA: 'We have at least 150 staff doing super guarantee work full time. Any level of non-compliance is of concern given the impact it has on employees'.

Australian Taxation office to get additional funding to implement measures to improve superannuation guarantee compliance by employers

Minister for Revenue and Financial Services, Kelly O'Dwyer has announced a package of reforms to give the Australian Taxation Office (ATO) 'near real-time visibility over superannuation guarantee (SG) compliance' by employers and reflecting recommendations in the Final Report of the SG Cross-Agency Working Group released on 14 July 2017.

The Government will provide the ATO with additional funding for a Superannuation Guarantee Taskforce 'to crackdown on employer non-compliance'. The package builds on legislation already announced to close a legal loophole used by unscrupulous employers to short-change employees who make salary-sacrifice contributions to their superannuation according to the Minister.

The package includes measures to:

• Require superannuation funds to report contributions received more frequently, at least monthly, to the ATO. This is intended to enable the ATO to identify non-compliance and take prompt action.
• Modernise payroll reporting through the rollout of Single Touch Payroll (STP). Employers with 20 or more employees will transition to STP from 1 July 2018 with smaller employers coming on board from 1 July 2019. This is intended to reduce the regulatory burden on business and transform compliance by aligning payroll functions with regular reporting of taxation and superannuation obligations.
• Improve the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and use of security bonds for high-risk employers, to ensure that unpaid superannuation is better collected by the ATO and paid to employees’ super accounts.
• Give the ATO the ability to seek court-ordered penalties in the most egregious cases of non-payment, including employers who are repeatedly caught but fail to pay superannuation guarantee liabilities.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said 'Employers who deliberately do not pay their workers’ superannuation entitlements are robbing their workers of their wages. This is illegal and won’t be tolerated…The Turnbull Government is taking action to safeguard and modernise the SG so employers can’t hide from their legal duty. We will give all Australians confidence that the superannuation system is working in their best interests.' The ABC quotes Minister O'Dwyer as stating 'Under the Government's new changes, those employers will face the full force of the law.

They will find themselves for the first time as being directly responsible for their employees' superannuation accounts…The ATO will have new ability to seek court-ordered penalties in the most egregious of the cases of non payment and they will be able to secure assets for high-risk employers.' The article adds, that Minister O'Dwyer has said that legislation to close a legal loophole allowing the practice of holding back salary sacrificed contributions from staff to boost the perception of a business' cash flow would be introduced in the next session of parliament.

No further changes planned to taxation of Superannuation says Minister for Revenue and Financial Services

In a speech to the Tax Institution National Superannuation Conference, The Minister for Revenue and Financial Services Kelly O'Dwyer has said that there are no further planned changes to taxation of superannuation.

The Minister said: …'the Government legislated a comprehensive package of structural reforms to the taxation treatment of superannuation – to improve the sustainability, flexibility and integrity of the system. The measures ensure that superannuation taxation concessions are well-targeted and balance the need to encourage people to save to become self-sufficient in retirement with the need to ensure long term sustainability. Many of these measures took effect on 1 July this year. I am pleased to report today that the Coalition has done the job that we needed to do on the taxation of superannuation. That job has been finished and legislated. We have no further plans.'

Self managed superannuation fund reporting

>Responding to concerns raised by the Tax Institute regarding providing agents and funds with adequate time to prepare for changes requiring SMSF trustees to report more regulatory to the ATO to the ATO, the minister said:

>Recognising the significant change for SMSF trustees in moving to event based reporting, the ATO is providing them with a number of administrative concessions eg events that happened during the 2017-18 year will generally not need to be reported until the annual return for the 2016-17 year is due, which for many funds will not be untilMay2018.

A pension's commencement value (that is, the value of the assets supporting a pension) does not need to be reported until 28 days after the quarter in which it commenced.

SMSFs that took action before 1 July2017 to avoid exceeding the transfer balance cap will not need to determine the precise value of the commutation until they are required to lodge their annual return which for many funds will not be untilMay2018, provided the ATO's Practical Compliance Guidelines are complied with.

ATO report finds Superstream program has delivered industry-wide benefits in productivity and efficiency

The ATO released the SuperStream program benefits report. The report states that SuperStream was designed to be a comprehensive package of legislative and administrative reforms to provide the industry with 'fit for purpose' data standards to modernise the processing of fund member transactions, and also improve the member, employer and fund experience and their confidence in the superannuation system. The report finds that there are three key benefits of SuperStream: lower cost; ease of operation in the superannuation system; and increased retirement savings and confirms the 'magnitude of the industry-wide shifts in productivity and efficiency by these indicators '. At the core of these benefits is the emergence of a network of messaging gateway providers. These gateway providers efficiently process over 80million transactions per year in a standardised digital form'.

[Sources: ATO Media Release 29/08/2017; SG gap estimate; The ABC 29/08/2017; Minister for revenue and financial services Kelly O'Dwyer media release 29/08/2017; The ABC 29/08/2017; Accountants Daily 29/08/2017; Minister for Revenue and Financial Services Kelly O'Dwyer Speech: Address to the Tax Institute National Superannuation Conference, Sydney 25/08/2017; SuperStream program benefits report – executive summary August 2017]