Employers refusing to pay as much as $17 billion in superannuation entitlement look like being given a 12-month amnesty to make good their debts before penalties are levied.
Legislation allowing the amnesty passed the House of Representatives on Wednesday despite opposition from the Australian Labor Party.
A spokesman for Revenue and Financial Services Minister Kelly O’Dwyer said the amnesty only applied to employers who voluntarily came forward to admit non-payment of the Superannuation Guarantee.
“In that case they will have to pay what is due, along with an interest charge, but there will be no extra penalties levied by the ATO. Those who don’t come forward and their non-payment is discovered by the ATO will be liable for penalties,” the spokesman said.
Unpaid super has emerged as a huge issue in recent times. The ATO has estimated $2.8 billion goes unpaid annually and Industry Super Australia submissions to Parliament on the subject put the figure as high as $17 billion over the past seven years.
But the amnesty is expected to raise far less than those figures, with Ms O’Dwyer saying it is expected to result in 50,000 people receiving a share of $230 million in superannuation.
Shadow Treasurer Chris Bowen was opposed to the amnesty, saying the government should refer to an Australian law that has been in place for 25 years.
“We happen to think that non-payment of the superannuation guarantee is a serious breach of the law, should be dealt with accordingly and providing an amnesty … is exactly the wrong move,” he said.
Ms O’Dwyer defended the move, saying it would not leave workers worse off and employers would only get the benefit if they voluntarily admit their wrongdoing and are not already under investigation.
“Under the amnesty employers will not be off the hook. To use the amnesty they must pay all that is owing to their employees, including the high rate of nominal interest,” Ms O’Dwyer said.
“Employers that do not take advantage of the one-off amnesty will face higher penalties when they are subsequently caught – in general, a minimum 50 per cent penalty on top of the SG Charge they owe.”
Martin Fahy, CEO of the Association of Superannuation Funds of Australia, said he supported the amnesty.
“While we want all employers to comply with their SG obligations and pay SG contributions when they are due, we support measures that will address non-compliance,” Mr Fahy said.
“We are hopeful that the measure proposed will encourage employers to come forward. On that basis, we support the proposed measure – especially when considered with measures in [another recent bill] to significantly strengthen the ATO’s powers to address future non-compliance.”
Those measures referred to by Mr Fahy will tighten existing regulation by allowing for the jailing of employers who deliberately and consistently hold back workers’ superannuation entitlements.
Industry Super Australia public affairs director Matt Linden said it was not clear the amnesty would encourage recalcitrant employers to make good on unpaid entitlements.
“The key issue is whether the amnesty will actually work and trigger increased payment of historical SG amounts that would otherwise not be paid, given the ATO’s current compliance activities and the enhanced compliance arrangements of Single Touch Payroll,” Mr Linden said.
“Recent work from the International Monetary Fund is suggesting they may in fact be counterproductive and reduce future compliance,” he said.
Payments made during the amnesty period are also tax deductible.
The bill is expected to pass the Senate and become law. The second tranche of the super reform legislation will introduce measures to jail employers who consistently and wilfully refuse to pay super entitlements.