Fixing the SG regime by going back to original intentions

If one thing has become very clear from the Parliamentary Committee inquiry into the non-payment of the superannuation guarantee (SG) it is that the Australian Taxation Office (ATO) is a less than proactive policeman.

What anyone reading the submissions to the Senate Economics Committee inquiry would discover is that while the ATO unquestionably fulfils its obligations with respect to the SG, those obligations fall well short of what most uninformed superannuation fund members would expect.

Put simply, employers who fail to pay the 9.5 per cent SG on behalf of their employees are not necessarily going to be detected by the ATO and, even if they are, this will not necessarily equate to employees being properly reimbursed.

Related News:

When Industry Super Australia (ISA) last year produced research portraying non-payment of the SG as a major problem it is arguable that the accompanying rhetoric somewhat overstated the case. The ATO certainly thought so with officials saying as much to members of the Parliamentary committee.

But hyperbole aside, what the ISA research did was highlight the degree to which SG payments tended to be one of the first things to stop when employers hit financial trouble as well as the degree to which this could go largely undetected unless it was pursued by the employees themselves, their unions or, in rare instances, their superannuation funds.

The ATO cannot tell you the gap between the amount of SG payments that ought to have been paid and those which actually have been paid because it has not yet undertaken the statistical exercise necessary to do so and it seems it is unlikely it will be doing so any time soon.

But while unions, the superannuation funds and even accountancy bodies acknowledge that SG non-payment is a serious on-going problem, the ATO appears to be not unduly perturbed arguing that it represents a relatively minor proportion of total SG payments received.

According to the ATO’s submission to the Senate inquiry, on average, the ATO receives reports from employees which relate to approximately 15,000 employers who are subsequently investigated by the ATO each year.

“This represents approximately two per cent of the estimated 880,000 employers who make SG payments. We do find that nearly 30 per cent of these employers have in fact paid the required SG to their employee. However an SG shortfall is identified in the remaining 10,000 cases. This represents approximately one per cent of the estimated 880,000 employers.”

The problem for the ATO is that other submissions to the Senate Committee made clear that many employees were simply not sufficiently informed and capable of notifying instances of non-payment and there were certainly instances where, in any case, the employer responsible had entered receivership making the process even more problematic.

Perhaps the most sensible suggestion to emerge from the whole review of SG non-payment is that employers should be made to meet their obligations at the same time as they pay their employees their wages – usually fortnightly or monthly.

This was certainly one of the recommendations of accountancy body CPA Australia which recognised the degree to which businesses, particularly small businesses, were inclined to miss SG payments when they ran into trouble, particularly cashflow troubles.

CPA Australia suggested the quarterly SG payment cycle with payments due within 28 days made it hard for the ATO to effectively monitor payments, and urged adoption of a regime of real-time payments in lockstep with the payment of wages.

The submission then, quite correctly, pointed out that the quarterly SG regime was never intended to be more than an introductory measure with the original intention having been to move employers to monthly SG payments.

The originators of the SG were right and if the Senate Committee does nothing else, it should recommend the imposition of a monthly SG cycle on employers and the resourcing of the ATO to ensure this occurs.

Related Content

SMSF Association lauds Fleming’s ATO appointment

The SMSF Association has welcomed former KPMG partner, Dana Fleming’s appointment as Australian Taxation Office (ATO) Assistant Commissioner, self-m...more

Closing pay gap won’t get super equity

Closing the gender pay gap is not enough to close the superannuation gap, as workforce spells and lost compound returns will still leave women facing ...more

“Onerous” SG non-compliance penalties hurt small businesses

The Institute for Public Accountants has slammed penalties for super guarantee (SG) non-compliance as “draconian,” saying that they could be very ...more




The timing of payment of SG should be the same as the payment of employee's wages. Gone are the days when administration systems were unable to handle the frequency of payment, there are no excuses. I would add this should also be supported by employees taking a greater interest in their superannuation entitlements. Rarely would an employee be unaware of failing to receive their fortnightly/monthly wage, the same should be said for their superannuation contribution. After all, it is their money.

Add new comment