Tax Laws Amendment (Superannuation Reporting) Bill 2004


Index

Bills Digest No. 53,  2004–05

Tax Laws Amendment (Superannuation Reporting) Bill 2004

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details


Passage History

Tax Laws Amendment (Superannuation Reporting) Bill 2004

Date Introduced: 18 November 2004

House: Representatives

Portfolio: Treasury

Commencement: Royal Assent

Purpose

This Bill removes the requirement for employers to report to employees the amount of employer s Superannuation Guarantee (SG) contribution.

Background

Generally, superannuation is a tax-effective investment vehicle accumulating resources for retirement purposes. Superannuation s legislative framework is complex as it is governed by prudential, taxation, contributions, end benefit and disclosure legislation and regulations. Frequent legislative changes compound the system's complexity. In addition, the superannuation system constantly changes as many of the financial thresholds are indexed to various economic indices, such as the consumer price index or the average weekly ordinary time earnings.(1)

The SG scheme requires all employers to provide a minimum level of superannuation support in each financial year for their employees. The scheme operates together with superannuation paid as a condition under industrial awards so that an employer s contribution may be counted as satisfying their SG obligations. The minimum level of employer support is 9 per cent of employee s earnings.(2) Contributions are required to be made on a quarterly basis, although employers are not prevented from making more frequent contributions.(3)

The obligation to make quarterly payments was implemented at the same time as the requirement for employers to report to the employees about their SG contributions. Both were part of superannuation reforms stemming from the Liberal Party s 2001 election campaign statement A Better Superannuation System.(4)

The obligation of employers to report to employees on the amount of their SG contributions is contained in section 23A of the Superannuation Guarantee (Administration) Act 1992 (SGAA). This provision was inserted into the SGAA by the Taxation Laws Amendment (Superannuation) Act (No. 2) 2002 (TLASA) and became effective on 1 July 2003.

The reporting obligation was designed to both:

  • increase an employees interest in and involvement with their superannuation payments; and

  • give a more timely flow of information so that the member, and/or the Australian Tax Office (ATO), could take earlier action should the SG payments not be made.(5)

Basis of policy commitment

This Bill enacts the Government s policy of reducing the compliance burden faced by small business. The specific commitment to remove the requirement for employers to provide reports on SG contributions to employees was made in the statement Committed to Small Business of 6 July 2004. (6)

Position of significant interest groups/press commentary

The Association of Superannuation Funds of Australia (ASFA) strongly opposes the repeal of section 23A of the SGAA. In a recent press release, ASFA noted that:

The government s proposal to abolish quarterly reporting by employers of superannuation payments from January 1 2005, will be a serious impediment to workers, and could also jeopardise the safety of super, when choice of fund is introduced next year, . This move is aimed at making life easier for employers, and small employers in particular, but reducing employees rights and information is certainly not the way to go [ ](7)

ASFA is concerned that the removal of any requirement for employers to report on their SG contributions to employees will lessen the degree of control that employees can exercise over their superannuation benefits in the accumulation phase. In ASFA s view, this appears to contradict the outcome achieved by the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 (the Choice Legislation), which comes into force on 1 July 2005.(8) In ASFA s view, one of the outcome s of the Choice legislation was to increase the amount of control an employee has over their superannuation. Any development that potentially reduces this control runs counter to the outcome of the Choice legislation.

The Investment and Financial Services Association (ISFA) understands the need to reduce the compliance burden on small business. However, ISFA still believes Australian s should know where their super is paid and be in control of that process, if possible.(9)

The Australian Consumers Association is concerned that any reduction in the flow of information to the employee will reduce the employer s accountability.(10)

The Australian Institute of Superannuation Trustees considers the proposed removal of the reporting requirement to be regrettable and retrograde .(11)

The Australian Council of Trade Unions has expressed concern that the ability to collect outstanding contributions will be further reduced by the proposed change, and that the current mechanisms for enforcing compliance with the requirement to pay SG monies to employees are far from satisfactory.(12)

However, the Australian Chamber of Commerce and Industry believes that the proposed change will not prejudice employees, as employers must still make SG payments on a quarterly basis and the employee may approach their superannuation fund at any time to gain information on their employers SG contributions made on their behalf.(13)

Pros and cons

The proposed measure will reduce both the costs and compliance burden associated with reporting to employees on the employers SG contributions. A significant proportion of employees will still receive information about their superannuation entitlements at quarterly intervals under a combination of existing superannuation workplace and industrial relations legislation. Further, members may approach their superannuation fund at any time and request information about the contributions received on their behalf by that fund.

The main argument against the repeal of section 23A of the SGAA is that it will lessen the flow of timely information to members and thereby reduce the opportunity for appropriate action to enforce compliance with the requirements of that Act by either the member, or the ATO. Further, it is argued that this reduced flow of information will increase public disengagement from superannuation and lead to a greater amount of superannuation being placed in the lost category , especially for casual employees.(if any)

Main Provisions

Schedule 1 of the Bill repeals section 23A of the SGAA with effect from 1 January 2005.

Concluding Comments

The issue of employees receiving timely information has been addressed by the Government. In his second reading speech, The Minister for Revenue and Assistant Treasurer, Mr Mal Brough MP noted that:

Employees will still be provided with information on at least an annual basis from their superannuation fund and many will receive information more frequently on pay slips as required by various Australian workplace legislation provisions and awards.(14)

Corporations Law and Regulations require that regular reports are given by superannuation funds to their members on, amongst other matters, the contributions on their behalf to their fund(s).(15) These reports are required to be given on an annual basis. Further, employees covered by Federal industrial awards must receive notification of the amount of superannuation contributions paid, and the fund they are paid to, on their payslips.(16)

At the State level Victorian employees are covered by Federal Workplace legislation. In Queensland and South Australia, only the amount paid into a superannuation fund must be notified on an employee s payslip.(17) The requirement for this information to appear on payslips in other States is currently unclear.

In addition, once the Choice of Superannuation legislation comes into force, most employees will know where their superannuation payments are made. Either by choosing a fund where these payments will be made, or if they do not nominate a fund, the employer must inform them of the default fund into which these payments are made. If the employer changes the default fund they must notify the employee of any such change.(18)

Finally, a superannuation fund member can approach the fund provider to provide information on their benefits, including any contributions made under the SG regime. The fund provider must comply with this request as soon as practicable. (19)

While the proposed measure may contribute to an increasing amount of lost superannuation, it is not the cause of the problem. The ATO provides a free service to assist members in tracking down any of their superannuation that may become lost due to frequent changes in employment or any other circumstances.(20)

Any disadvantages arising from any reduction in the flow of timely information to fund members must be balanced against the reduction in costs and compliance burden for small (and other) business by the removal of this reporting requirement. The cost reduction is likely to be of greatest benefit to small business. While the Government is clearly aiming to reduce the cost and regulatory burden of the small business sector, the proposed change will also benefit all other business sectors.


Endnotes

  1. David Kehl, Taxation Laws Amendment (Superannuation) Bill (No. 2) 2002, Bills Digest, no. 31, Parliamentary Library, Canberra, 2002-03, p. 7.

  2. Section 19(2) Superannuation Guarantee (Administration) Act 1992.

  3. David Kehl, op. cit. p. 8.

  4. Liberal Party of Australia, A Better Superannuation System, Policy Statement, 5 November 2001, p. 9.

  5. Senator Helen Coonan, Minister for Revenue and Assistant Treasurer, Second reading speech: Taxation Laws Amendment (Superannuation) Bill (No. 2) 2002 , Debates, Senate, 27 June 2002, p. 2962.

  6. Joint statement by J. W. Howard, Prime Minister and J Hocky, Minister for Industry, Tourism and Resources, Policy Statement, Committed to Small Business, 6 July 2004, p. 17.

  7. ASFA media release, Super Choice Handicapped Before It Starts, 18 November 2004.

  8. Under the Choice regime established by the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004, members can nominate the superannuation fund to which their SG and superannuation payments can be made. The employee s ability to nominate a fund potentially increases the control they have over those monies.

  9. Bill Stanhope, Manager Government Relations, Investment and Financial Services Association, interview with the author, 23 November 2004.

  10. Catherine Wolthuizen, Australian Consumer s Association, quoted in Peter Weeks, In the Dark, Australian Financial Review, 24 November 2004.

  11. Andrew Whiley, Vice President of the Australian Institute of Superannuation Trustees, quoted in Peter Weeks, In the Dark, AFR 24 November 2004.

  12. Sharan Burrow, President of the Australian Council of Trade Unions in Peter Weeks, In the Dark, Australian Financial Review, 24 November 2004.

  13. Peter Hendy, Chief Executive, Australian Chamber of Commerce and Industry, in Peter Weeks, In the Dark, Australian Financial Review, 24 November 2004.

  14. Mal Brough, Minister for Revenue and Assistant Treasurer, Second reading speech: Tax Laws Amendment (Superannuation Reporting) Bill 2004, House of Representatives , Debates, 18 November 2004, p. 8.

  15. The statutory reporting requirements for superannuation funds (and any other financial product) are now placed in part 7.9 of the Corporations Act 2001 and Division 5 of the Corporations Law Regulations 2001. In respect to superannuation funds, the reporting requirement to members about their contributions is found in section 1017D of the Corporations Act 2001.

  16. Regulation 132B(1)(i) and 132E(1)(e), Federal Workplace Relations Regulations 1996.

  17. Queensland, section 370(i) Industrial Relations Act 1999, & South Australia, section 102(7)(b), Industrial and Employee Relations Act 1994.

  18. Sections 32N and 32P, Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004.

  19. Sub sections 107C(2) and (8), Corporations Act 2001.

  20. Go to http://www.ato.gov.au/super/

 

Contact Officer and Copyright Details

Leslie Neilsen
26 November 2004
Bills Digest Service
Information and Research Services

This paper has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Information and Research Service, nor do they constitute professional legal opinion.

IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 2004

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by members of the Australian Parliament in the course of their official duties.

Published by the Parliamentary Library, 2004.

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