Some Australian employers haven't been paying their workers all their superannuation entitlements, but new laws introduced in July 2018 are expected to change this.
From July this year, big employers were obliged to report their employees' payroll details and compulsory superannuation payments to the Australian Taxation Office (ATO) through Single Touch Payroll (STP). The new reporting regime is mandatory for employers with 20 or more employees.
Employers are required to report payments such as salaries and wages, pay as you go (PAYG) withholding tax and superannuation guarantee (SG) information. These payments must be reported to the ATO from an employer's payroll software solution each time the employees' wages are paid.
Employer's payroll software therefore needs to allow for STP reporting, otherwise, they may risk steep penalties from the ATO.
Super theft to diminish
Importantly, compulsory reporting of SG information will allow employer payments of superannuation to become more transparent.
The ATO estimates $2.85 billion, or 5.2% of the annual $54.78 billion in SG obligations were not paid to employees in 2014-15. Research from Industry Super Australia concluded even more went unpaid, estimating employees were denied $5.6 billion annually in superannuation entitlements.
According to numbers from Industry Super Australia, this deprived 2.76 million employees of an average $2,000 in superannuation payments. The federal government itself doesn't know exactly how much employers have 'stolen' from workers because the ATO has not, to date, monitored or measured the SG gap, as it's called.
ATO on watch
The move to STP reporting will help significantly to reduce the number of employers who are not paying their employees the appropriate level of superannuation. Information will be provided to the ATO in real time, when wages are paid to employees. This will provide a clear record of employers who are not paying correct SG payments.
Under the former system, employers were required to collect and distribute superannuation accrued by its employees. The collection system was open to abuse since employers sometimes did not collect these payments and the ATO had little way of finding that out. Some employers also counted workers' salary sacrifices as part of their 9.5% SG obligation, thereby 'stealing' the employee's SG entitlements.
Part of the problem was also that it was up to employees to raise the problem of non-payment of SG with their employers, or to report the issue to the ATO. Understandably, many workers were reluctant to do so, fearing that they might lose their jobs. Now, the ATO itself can more quickly identify non-payers of the SG and it can apply relevant penalties for employers for non-payment.
While the ATO announced that it will waive penalties for employers who fail to pay the correct superannuation to employees during a year-long amnesty period, penalties for employers caught after the amnesty period will be more severe, typically a minimum of 50% on top of the superannuation that is owed to employees.
To be protected by the amnesty period, which runs for one year from 24 May 2018, employers must pay out all outstanding SG payments. If that is not paid to employees within the year, the ATO will apply penalties.