Finance Your Super New tax reporting system won’t stop super underpayment: ISA

New tax reporting system won’t stop super underpayment: ISA

super underpayment untouched.
Planned changes won't necessarily address the problem of super underpayment. Photo: Getty
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A new tax reporting system to be introduced from July by the Australian Taxation Office will not solve the $3.6 billion superannuation underpayment rort exposed late last year, according to Industry Super Australia.

The rort was exposed by a joint report from Industry Super Australia (ISA) and Cbus, estimating that one-third of workers (2.4 million) had missed out on an average of $1489 in superannuation entitlements, or four months’ contributions, through non or underpayments by employers in 2013-14.

New analysis from Industry Super says Australians who missed out on super payments had overall fund balances $19,709 (or 47 per cent) lower than those who were paid.

The research showed people aged between 60 and 64 and earning salaries of between $50,000 and $75,000 who did not receive the correct entitlement could have super balances short-changed by $35,000. They could be forced to rely more on the age pension as a result, worsening federal government budget problems.

Those findings triggered moves by the ALP opposition to launch a Senate inquiry into the issue, at which both ISA and the ATO appeared on Wednesday.

At the enquiry the ATO rejected ISA’s figures, saying it did not consider the survey “reliable as the report uses ‘averages’ to reach a specific estimate, rather than an estimate expressed within a ‘range’”.

In its submission, the ATO says the introduction of its “single touch” payroll system will require employers to report to workers fortnightly on superannuation guarantee (SG) contributions, along with wages and salary information and income tax payments.

It will “support continuous monitoring of SG shortfalls at the employer and employee level for those employers required to comply with the Single Touch Payroll initiative”, the ATO submission said.

However Matt Linden, ISA’s public affairs director, told The New Daily that the organisation told the enquiry on Wednesday “that nearly half (43 per cent) of all employers would not be covered by single touch as employers with less than 20 employees are not required to comply.”

Those small firms with less than 20 employees are disproportionally responsible for SG under and non-payment, Mr Linden said.

The ATO did not comment on the issue, with a spokesperson simply referring The New Daily to the ATO’s submission to the enquiry.

Kelly O"Dwyer says the ATO will trial a small business solution.
Kelly O’Dwyer says the ATO will trial a small business solution. Photo: AAP

Superannuation Minister Kelly O’Dwyer said “while employers with 19 employees or less will not be required to use Single Touch Payroll (STP) for reporting superannuation guarantee (SG) this does not exempt them from complying with the SG law”.

The ATO conducts a range of compliance activities to ensure employers meet their SG obligations and identify those do the wrong thing. The ATO is currently conducting a pilot of STP with small businesses which includes its use for reporting SG obligations,” she said.

The onus is on the worker

In its submission, the ATO says it does not require employers to report to it on SG payments, saying “the main way the ATO becomes aware of a potential SG shortfall is when an employee reports this matter to the ATO”.

“This is known as an ‘employee notification’ (EN). The ATO receives approximately 20,000 employee notifications per year.” Of these about 10,000 are acted upon after investigation.

The ATO collects only 65 per cent of SG debts it identifies. Source: ATO
The ATO collects only 65 per cent of SG debts it identifies. Source: ATO

Mr Linden contrasted this approach to the social security area where “the government does very detail compliance analysis” to ensure beneficiaries are entitled to what they receive.

The area has been highly controversial in recent times with Centrelink persisting with a new automated debt recovery system despite up to one in five of its claims of debts owed by beneficiaries being found to be incorrect.

Mr Linden rejected the ATO’s claim that ISA’s figures on unpaid super were unreliable and said the situation is probably worse than the research shows.

“We used a very conservative cut-off for contributions of 8.5 per cent when the SG is actually 9.5 per cent now and was 9 per cent in 2013-14 (the year targeted by the research).”

The New Daily is owned by a group of industry super funds.

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