'Even if you are one day late, or have a very good reason for the delay, the ATO can't agree that you should be let off from compliance with the repercussions.'
The Commonwealth government has warned employers that they must pay the compulsory superannuation to employees or face big fines.
Australia will introduce legislation to Parliament soon – the Protecting Worker Entitlements Bill – which will enact a right to superannuation payments in the National Employment Standards.
“Employers are currently required to make superannuation payments at least quarterly directly into a superannuation fund nominated by the employee, or a default fund where no fund details are provided, to avoid any obligation to pay the superannuation guarantee charge,” Jo Alilovic, director of 3D HR Legal, said.
“Options for ensuring compliance include ensuring someone in the organisation is fully educated about the obligation to pay and how to calculate it, diarising the due dates, implementing technology — such as accounting platforms which include superannuation payment calculations — or just outsourcing the whole requirement to an external bookkeeper.”
The Australian Tax Office (ATO) estimated that workers lost $3.4 billion in unpaid superannuation in the financial year of 2019-2020.
The new legislation will increase the rights of employees to pursue superannuation owed to them, and employers may face civil penalties if they do not comply.
The most common reason that employers don’t pay superannuation is cash flow issues, Daniel Taborsky, founder of Birchstone Tax Law firm, said.
“Employers will spend the money and then it is not available when the superannuation payments fall due.”
Also, some employers simply fail to make sure that payment is received by the fund by the due date, he said.
“For example, employers may make superannuation payments to a superannuation clearing house by the due date, but they haven’t allowed sufficient time for the payment to be passed on by the clearing house to the fund by the due date.
“It is the fund, not the clearing house, that needs to receive the payment by the due date. The exception to this is the ATO small business superannuation clearing house, in which case the payment only needs to be received by the ATO clearing house by the due date.”
Employers need to make sure that they are fully aware of the ramifications of the impending legislation so that they are not caught paying harsh penalties.
The Fair Work Legislation Amendments (Protecting Work Entitlements) Bill 2023 includes adding superannuation as a right under the National Employment Standards.
At the moment, when an employee suspects that superannuation has not been paid correctly, they need to make a report to the ATO about unpaid superannuation contributions,” Alilovic said, and the ATO will then investigate the employer based on the information provided.
“The difficulty with this process for employees is that they have limited rights to information about the process. The ATO will only contact at specific points in the process, being when a query is received, the investigation is progressing, a debt is established, debt collection is progressing, and the query is closed.”
A standard enquiry might take 12 months until completion, she said.
“By including superannuation contributions as a minimum entitlement in the National Employment Standards, employees will be directly empowered to commence a legal action to recover the unpaid superannuation. Also, the obligation to make the super contributions in the NES will be a civil penalty provision, entitling the employee to also seek a penalty against the employer which may be payable directly to the employee.”
This means employers are exposed to legal actions for unpaid superannuation from multiple directions and may face additional costs for non-compliance, Alilovic said.
“A breach of a civil remedy provision in the Fair Work Act currently exposes a company to a penalty of up to $82,500 per breach, and an individual up to $16,500 per breach. It is also noted that there are provisions in the new proposed laws to prevent multiple actions for the same claim.”
What the legislation doesn’t do is add any additional superannuation obligations for employers, but it does require employers to comply, as interest will be calculated on late payments.
“There is an administration fee of $20 per employee, per quarter, a notional interest charge of 10% per annum on the unpaid amount, and also there are penalties starting at 200% of the unpaid amounts,” Taborsky said.
“One of the most important things to note is that the ATO has no discretion over these repercussions, other than the penalties. Therefore, even if you are one day late, or feel that you have a very good reason for the delay, the ATO can’t agree that you should be let off from compliance with most of these repercussions.”
