Bills Digest No. 160 2001-02
Superannuation Guarantee Charge Amendment Bill
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
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Superannuation Guarantee Charge
Amendment Bill 2002
Date Introduced: 16 May 2002
House: House of Representatives
Commencement: The later of 1 July 2003 and the date on which
the Act receives the Royal Assent.
To amend the
Superannuation Guarantee Charge Act 1992 to enable the
Superannuation Guarantee Charge to be imposed on a quarterly
The Superannuation Guarantee (SG) Scheme,
administered by the Australian Taxation Office (ATO), requires all
employers to provide a prescribed minimum level of superannuation
support for each of their employees, subject to limited exemptions.
Employers who fail to provide the prescribed level of minimum
support are liable to a SG Charge equivalent to the amount of the
superannuation not contributed (the 'shortfall') plus an interest
component and an administrative charge. Employer contributions to a
complying superannuation fund (or retirement savings account) for
the benefit of employees are generally tax deductible, but the SG
Charge is not.
The legislation governing the SG Scheme is the
Superannuation Guarantee Charge Act 1992 and the
Superannuation Guarantee (Administration) Act 1992. Both
Acts commenced operation on 1 July 1992.
The required minimum level of superannuation
support commenced in 1992 at 3 per cent of the employee's earnings.
Over the last 10 years, this rate has increased towards its
legislated maximum. The required minimum level of superannuation
support for 2001-02 is 8 per cent of the employee's earnings. This
will increase to 9 per cent from 1 July 2002 and subsequent
The level of superannuation support that an
employer provides in respect of each employee is measured on a
quarterly contribution period basis, however, SG contributions only
have to be made annually. To avoid incurring a SG liability, the
required SG contributions must be made by 28 July in respect of the
SG liabilities that have accrued over the previous financial year.
This means that an employer must calculate its quarterly SG
liability for every quarter year commencing 1 July, 1 October, 1
January or 1 April. The contributions do not have to be paid to a
superannuation fund until the following 28 July in respect of the
liabilities for the four quarters.
The scheme is administered on a self-assessment
basis. Generally, an employer who has a SG shortfall is required to
lodge a SG statement with the ATO together with payment of the SG
Charge by 14 August after the end of the financial year. Employers
are required to maintain adequate records to demonstrate their
compliance with the requirements of the scheme.
Section 55 of the Constitution provides that an
Act which imposes liability to pay a tax shall deal only with the
imposition of the tax and any provision in that Act dealing with
any other matter shall be of no effect.
The SG Scheme is implemented by the following
two statutes under the taxation power in section 51(ii) of the
- the Superannuation Guarantee Charge Act 1992, which
imposes a SG Charge on any SG shortfall of an employer in a year,
- the Superannuation Guarantee (Administration) Act
1992, which provides the legislative framework for the
assessment and payment of the SG Charge.
The Superannuation Guarantee Charge Act
1992 incorporates, and is to be read as one with, the
Superannuation Guarantee (Administration) Act 1992.
Report of the Senate Select
Committee on Superannuation and Financial Services, Enforcement
of the Superannuation Guarantee Charge
On 27 April 2001, the Senate Select Committee on
Superannuation and Financial Services released its report titled
Enforcement of the Superannuation Guarantee
Charge.(1) Chapter 4 of the Committee's report
examined the issues involved with the frequency and timeliness of
SG contributions. The Committee heard that the SG requirement for
annual payment caused a number of problems including:
- potential loss of investment earnings for employees
- potential loss of entitlements in the event of insolvency
- increased number of lost members
- impact on disability and income protection insurance
- less frequent contributions by employers can commercially
disadvantage employers that make on time and correct SG
The Committee also:
- received considerable support from superannuation industry
stakeholders for more frequent payment of SG contributions
- noted that a Private Member's Bill had been introduced to
require quarterly SG contributions, and
- noted that the then Assistant Treasurer and officers of the
Australian Taxation Office and the Department of the Treasury were
examining the feasibility of introducing quarterly SG
The Committee reported evidence received from
the ATO that 86 per cent of employers pay SG contributions
quarterly, or more frequently. The Committee also considered a
range of options for more frequent payment, including monthly and
quarterly payment. After considering the range of issues, the
Committee made the following recommendation:
4.24. The Committee recommends that the requirement for compulsory
SG contributions by employers, where it is not currently monthly,
be varied to provide for quarterly payments.(3)
2001 Election: Coalition Promises
During the 2001 election campaign, the
Government released a paper titled A Better Superannuation
System. This paper contained the following proposal to
introduce quarterly SG contributions:
Quarterly Superannuation Contributions
Australians can be confident that the vast
majority of businesses comply with their superannuation
obligations. Approximately 85% of businesses currently make
superannuation contributions quarterly or more often, whilst others
make superannuation contributions annually.
In order to ensure fairness between employees
and to encourage employers to make regular superannuation
contributions, the coalition will require all employers to make at
least quarterly superannuation contributions on behalf of their
The measure will take effect from 1 July
The 2002-03 Budget provided further details
about the implementation of this proposal. The relevant extract
from the Budget follows.
A Better Superannuation System
quarterly Superannuation Guarantee contributions
Australian Taxation Office
From 1 July 2003, employers will be
required to make Superannuation Guarantee (SG) contributions to a
complying superannuation fund or retirement savings account on
behalf of their eligible employees on at least a quarterly basis.
Currently, employers are only required to make SG contributions on
an annual basis, although most employers make contributions more
frequently than this.
As part of a quarterly SG regime, the following
will also apply:
- for defaulting employers, the Superannuation Guarantee Charge
(SGC) will be imposed quarterly with a lower administration
component and the nominal interest component calculated from the
beginning of the relevant quarter;
- the earnings threshold that determines whether an employee is
entitled to SG will change from $450 per month to
$1,350 per quarter;
- employers will be required to report to their employees the
amount and destination of SG contributions when contributions are
- in order to assist employers make the transition to quarterly
payments, no administration or nominal interest components of the
SGC will apply to shortfalls arising within the first two quarters
from 1 July 2003.(5)
As part of the 2002-03 Budget announcement, the
Minister for Revenue and Assistant Treasurer, Senator the Hon.
Helen Coonan justified changing the earnings threshold that
determines whether an employee is entitled to SG will change from
$450 per month to $1350 per quarter in the following terms:
The quarterly threshold should reduce the
compliance impact on business, particularly those with seasonal or
casual workers (e.g. rural and retail sectors). (6)
The earnings threshold is amended by the
Taxation Laws Amendment (Superannuation) Bill (No. 2) 2002. For a
discussion of the proposed amendment to the SG earnings threshold
and other related issues announced in the 2002-03 Budget,
interested readers are referred to the Bills Digest for Taxation
Laws Amendment (Superannuation) Bill (No. 2) 2002.
The Association of Superannuation Funds of
Australia welcomed the move to require employers to make more
regular quarterly payments of super
The ALP members of the Senate Select Committee
on Superannuation and Financial Services supported the
recommendations in the report Enforcement of the Superannuation
Guarantee Charge, including the recommendation to introduce
quarterly SG contributions.
The Australian Democrats member of the Senate
Select Committee on Superannuation and Financial Services supported
the recommendations in the report Enforcement of the
Superannuation Guarantee Charge, including the recommendation
to introduce quarterly SG contributions.
Separate Acts to comply with section
55 of the Constitution
There is a single Explanatory Memorandum for
both this Bill and the Taxation Laws Amendment (Superannuation)
Bill (No. 2) 2002.
Since the imposition of the SG Charge may amount
to the imposition of taxes, the amendment to the basis for
calculating the SG Charge requires separate legislation to comply
with the requirements of section 55, which was outlined in the
Background to this Digest. For this reason, the amendments to the
Superannuation Guarantee Charge Act 1992 are contained in
a stand-alone Bill.
Item 1 amends section
5 of the Superannuation Guarantee Charge Act 1992
(the Act) to change the imposition of any superannuation guarantee
charge of an employer from a year to a quarter. Section 6 of the
Superannuation Guarantee (Administration) Act 1992 defines
quarter. This definition is being amended by item
14 of Taxation Laws Amendment Bill (No. 2) 2002.
Item 2 amends the Act to change
the amount of superannuation guarantee charge payable on a
superannuation guarantee shortfall of an employer from the amount
of shortfall in a year, to an amount of shortfall in a quarter.
Item 3 clarifies the
application of the amendments by stating that they apply to SG
shortfalls made under the Superannuation Guarantee
(Administration) Act 1992 for quarters that commence on or
after 1 July 2003.
The proposal to require all SG contributions to
be paid on a quarterly basis has received broad support. It was
proposed as a Private Member's Bill during the 39th
Parliament, was suggested in hearings and in evidence to a Senate
Inquiry, and was the unanimous recommendation of that same Senate
inquiry. The change will only affect 15 per cent of employers since
85 per cent of employers pay SG on at least a quarterly basis. The
Bill will enhance the investment earnings of employees'
superannuation, reduce the risk of potential loss of entitlements
in the event of insolvency, reduce the number of lost members, and
enhance the disability and income protection insurance of fund
Related issues, such as the proposed amendment
to the SG earnings threshold and other 2002-03 Budget
announcements, are arguably, not so salutary. Interested readers
are referred to the Bills Digest for Taxation Laws Amendment
(Superannuation) Bill (No. 2) 2002.
- This report can be accessed in its entirety via the following
- Senate Select Committee on Superannuation and Financial
Services, Enforcement of the Superannuation Guarantee
Charge, 27 April 2001, pp. 52 3.
- ibid., p. 57.
- Liberal Party of Australia, A Better Superannuation
System, November 2001, p. 9.
- The Hon. Peter Costello, MP, Treasurer, Budget Paper No. 2:
Budget Measures 2002-03, Canberra, 14 May 2002, pp.13 14.
- Senator the Hon. Helen Coonan, Minister for Revenue and
Assistant Treasurer, A Better Superannuation System - Quarterly
Superannuation Guarantee Contributions, Press Release
C49/02, 14 May 2002.
- Association of Superannuation Funds of Australia, New Rule
Means Thousands Left Out Of Super, Press Release, 15 May
5 June 2002
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