More ATO action on super guarantee non-compliance

Employers should take note that the ATO is now back to its pre-COVID-19 setting in relation to late or unpaid superannuation guarantee (SG) amounts. Firmer SG-related related recovery actions that were suspended during the pandemic have now recommenced, and the ATO advises it will be prioritising engaging with taxpayers that have SG debts, irrespective of the debt value.

The Australian National Audit Office (ANAO) has recently issued a report on the results of an audit conducted on the effectiveness of ATO activities in addressing SG non-compliance. While the ANAO notes that the SG system operates largely without regulatory intervention, because employers make contributions directly to super funds or through clearing houses, the ATO does have a role as the regulator to encourage voluntary compliance and enforce penalties for non-compliance.

To measure the level of non-compliance in this area, the ATO uses a measure called the SG gap, which is an estimate of the difference between the amount the ATO collects and what would have been collected if every taxpayer was fully compliant. The most recent data from the ATO was published in 2021 and indicated that the Australian total net SG gap in 2018–2019 was around $2.5 billion.

Overall, the ANAO report found that ATO activities addressing SG non-compliance have been only partly effective. This also held true for the risk-based SG compliance framework in which the ATO operates. The report notes that while there was some evidence that the ATO’s compliance activities were improving employer compliance, the extent of improvement could not be reliably assessed.

The report makes three recommendations to improve ATO compliance activities in relation to SG non-compliance. The first is that the ATO should implement a preventative approach to SG compliance. The second is that the ATO should assess its performance measures against the Public Governance Performance and Accountability Rule 2014 and enhance its public SG performance information. This includes setting targets for measures such as the SG gap and having explanations for performance results, as well as changes over time.

While the first two recommendations are likely to have a negligible practical impact on day-to-day operations for employers in general, the ANAO’s third and final recommendation may be a different story. Among other things, the ANAO recommends that the ATO maximise the benefit to employees’ super funds by making more use of its enforcement and debt recovery powers, and consider the merits of incorporating debtors that hold the majority of debt into its prioritisation of debt recovery actions.

In its reply to the ANAO report, the ATO agrees with this third recommendation and states that while it paused many of its firmer SG related recovery actions through the COVID-19 pandemic, those have now recommenced. With the recommencement of recovery actions, the ATO’s focus will generally be on taxpayers with higher debts, although it will be prioritising taxpayers with SG debts overall, irrespective of the debt value.

The ATO’s reply also agrees with the first two recommendations in whole or part. It says that it has already begun implementing a preventative compliance strategy using data sources such as Single Touch Payroll (STP) and regular reporting from super funds. The ATO expects to continuing prioritising a preventative approach while also strengthening its data capability.

In addition, the ATO has indicated it will continue to investigate every complaint received in relation to the non-payment of SG, and take action where non-payment is identified. The actions available include the imposition of tax and super penalties, as well as the recovery and back-payment of super to employees. It will also be increasing transparency of compliance activities and employer payment plans so that affected employees are aware of the expected timing of back payments of super.

Source: www.anao.gov.au/work/performance-audit/addressing-superannuation-guarantee-non-compliance 
www.ato.gov.au/Media-centre/Media-releases/Statement-on-ANAO-performance-audit--Addressing-Superannuation-Guarantee-Non-compliance-audit/ 
www.ato.gov.au/Business/super-for-employers/missed-and-late-super-guarantee-payments/