Accessibility and timeliness of SG data
Accessibility and timeliness of SG data
The current design of the SG system is essentially based on the
employment relationship between an employee and their employer, and
subsequently between their employer and the employee's superannuation fund. The
ATO is then informed annually in October of the event of SG payment by the
employee's superannuation fund via a Member Contribution Statement.
The ATO pointed out the problems this causes for its SG compliance work:
This design creates significant time lags which impact on the
ATO's ability to monitor and detect non-payment early due to the quality and
nature of annual reporting of contributions by superannuation
The SGA Act does not require employers to report payments made to an
employee's superannuation fund to the ATO. Although the ATO receives annual
PAYG (pay as you go) payment summaries from employers, these do not include SG
payment data and only report gross payments, which do not allow for OTE to be
The Member Contribution Statement (MCS) the ATO receives each October
from APRA regulated superannuation funds focuses on member (i.e. employee)
reporting, not employer reporting. It reports the total super contributions
received by the fund for their member, and does not consistently identify the
employer who contributed the SG.
The time lag and data constraints of this current arrangement means it
can be difficult for the ATO to identify employers who are not keeping up with
their SG obligations:
The ATO does not currently have visibility or a timely way to
monitor the reporting or payment of SG by an employer. Super funds report
member contributions to the ATO on an annual basis and as a result ATO has no
visibility of payment information for up to 15 months after the start of a
year. This means non-compliant employers can be difficult for the ATO to
identify in a timely manner.
The ATO provided an overview of the challenges it faces in regard to
data. These were summarised as follows:
There are currently limitations in the data (e.g. Member
Contribution Statements) provided by third parties (i.e. superannuation funds)
to the ATO.
Employers who make superannuation contributions to employees
cannot be consistently identified. This limitation reduces the ATO's ability to
identify employers who have not complied with SG legislation.
The tax file numbers of employees' reported in Member
Contribution Statements from superannuation funds are in some instances not
correct. This data limitation means that the ATO is unable to identify the
right employees during risk assessments of employers.
The inability of the ATO to obtain more timely data from superannuation
funds has been highlighted in previous reviews on the ATO's administration of
the SG system. For example, both the 2010 IGT report and the 2015 ANAO report
raised the matter in their respective recommendations.
The IGT summarised the situation in the following manner:
The effectiveness of the ATO's ability to detect unpaid SG is
very much dependent on the timelines and reliability of the data that it is
able to obtain or is otherwise available to it.
The committee is of the view that the annual MCS lodged with the ATO by
APRA regulated superannuation funds should contain more detailed information
than is currently required. The committee considers it necessary that an MCS
delineate each category of superannuation payment received (for example SG,
additional contributions as required through an industrial agreement, and any
voluntary contributions from an employee), and in the case of multiple
employers, clearly set out which contribution is from which employer.
The committee considers that this level of detail is essential to allow
the ATO to gain a more comprehensive picture of SG payment and better carry out
its compliance activities in the SG space.
The committee recommends that the government revise the information that
APRA regulated superannuation funds must include in Member Contribution
Statements to include a breakdown of each category of superannuation payment an
employee has received, as well as the employer it was received from.
Information sharing between government agencies
Although the ATO is the core agency tasked with dealing with non‑payment
of SG, other government agencies also hold information about the operations and
viability of stakeholders in the SG system. These agencies include ASIC, APRA
and the FWO.
The committee received evidence confirming there is already a level of
information sharing between government agencies. For example, under a
memorandum of understanding between the ATO and the FWO, the ATO receives twice
yearly reports from the FWO containing details of employers who appear to have
not paid SG contributions.
When asked by the committee whether there would be some benefit in more
regular reporting between the two agencies, the ATO clarified that the twice
yearly exchange was a 'self-imposed restriction' and it was possible for
information sharing to happen on an ad hoc basis.
Ms Debbie Rawlings, the ATO's Assistant Commissioner of Superannuation,
We do exchange on some larger or noteworthy cases; they
happen outside that cycle. It is possibly to exchange more regularly. At the
moment it is six-monthly.
The committee questioned the ATO and APRA over the kind of information
sharing relationship between the two agencies. Mr Sacha Vidler, the Senior
Manager of the Specialist Superannuation, Industry Tech Services, Policy and
Advice Division at APRA, summarised the relationship as such:
APRA collects a lot of data from funds. It is collected
fundamentally at a fund level. In terms of estimating SG requirements for
individuals or by employer, which is what we need to look at [for] this
compliance question, it is not that useful. The ATO and APRA have a memorandum
of understanding for sharing information relevant to our work, but that is on a
case-by-case basis. Incidence of sharing is evaluated at quite a high level
Mr James O'Halloran of the ATO noted:
We have a close relationship in a whole range of ways. I
would proffer that, probably from the ATO's point of view, a lot of the
framework and information that APRA gets is probably not active enough for
case-type work. Certainly, our main complementary work is particularly with the
Mr Vidler further detailed:
...I would just add that, to the extent that there is a data
gap that influences SG non-compliance, it is not generated by a failure to
share. The data is not collected...
When asked whether there was any other data that APRA could provide to
the ATO that may assist in SG compliance activities, Mr Vidler further
We provided the data that we had on contributions, SG and
otherwise, as part of our consideration as a working group. But they are
aggregate. They are certainly not split at the employer level, which is what
you need to evaluate this problem. So it gives you a sense of the scale of
industry but it does not go to this question of compliance.
ISA summarised the current state of information sharing between
government agencies and emphasised the disconnect present in the arrangements:
The ATO can access information at the level of the individual
and relevant employer for each contribution, for all such employees and
employers, but as they have noted in testimony and submissions, they are
currently unable to readily identify an employee's OTE base. Superannuation
funds cannot identify the OTE base for a payment, APRA only receives aggregated
reports, and ASIC and the FWO are more likely to act on complaints rather than
responding to a universal information system.
Professor Helen Anderson noted that there did not appear to be a strong
exchange of information between ASIC and the ATO in regard to insolvent
It is interesting that in the third party reports to the ATO
there is a huge amount from the Fair Work Ombudsman and nothing from ASIC. At
the end of every insolvency, the external administrator sends a report about a
given company to ASIC estimating how much was not paid in wages and super and
all sorts of bits of information. ASIC does not appear to pass any of that on
to the ATO, and I find that quite startling. There are roughly 8,000
liquidations per year, and that information they have gathered could be passed
on. That may be a structural issue within the ASIC Act, perhaps. There are
privacy concerns there about disclosing that information, because it does not
lead to a specific prosecution, perhaps. But it seems to me that is a valuable
amount of information that ASIC gathers as part of its own operations, that
could be useful here.
Professor Anderson made reference to a table included in the ATO
submission setting out the sources of third party SG referrals:
Table 7.1—Source of third party SG referrals
|Fair Work Ombudsman
|Internal ATO referrals
Professor Anderson observed that given roughly 40 per cent of
insolvencies involve unpaid superannuation and there are approximately 8000
liquidations per year, it could be reasonably expected that there would be
potentially thousands of referrals from ASIC to the ATO. Assuming these
referrals would be categorised under 'other', the ATO table appears to indicate
that this information exchange is not occurring.
On a related matter, Professor Anderson also drew the committee's
attention to the fact that while approximately 8000 companies enter liquidation
each year, and their employees are able to access FEG, five times as many
companies each year are abandoned and then eventually deregistered by ASIC for
failure to pay annual fees and submit returns. Employees of abandoned companies
receive no entitlements from the company and are not eligible for assistance
from FEG. Professor Anderson emphasised that it is impossible to account for
the amounts of lost superannuation of employees of abandoned companies.
The committee is of the opinion that better coordination between
government agencies is a necessary condition to improve the detection of SG non‑payment.
The current capabilities around the collection, sharing and storage of digital
information should act as an incentive for government agencies to re-evaluate
their current data coordination arrangements and consider what improvements
could be made.
The committee is particularly concerned that valuable information held
by ASIC on insolvency cases is not being properly referred to the ATO. In
addition, the matter of unpaid SG left by abandoned companies is an issue that
the committee feels ought to be better tracked.
The committee recommends that the ATO and ASIC review their data sharing
arrangements to ensure that information on insolvency cases is being referred in
a timely manner from ASIC to the ATO.
The committee recommends that the ATO and ASIC work together to collect
data on abandoned companies to produce a comprehensive picture on the levels of
unpaid SG contributions left by such companies.
The committee is also of the opinion that it may be beneficial for the
ATO and FWO to formally agree to exchange information more frequently than the
six monthly cycle set out in their current memorandum of understanding.
The committee recommends that the ATO and FWO review their memorandum of
understanding to consider whether more frequent information exchanges would
improve their SG compliance activities.
The committee notes that during the 44th Parliament it
inquired into insolvency in the Australian construction industry. The 2015
report made two recommendations related to the sharing of data around SG
3.72 The committee recommends that the ATO and ASIC increase
their formal cooperation with superannuation funds to coordinate measures
around early detection of non-payment of superannuation guarantee.
3.73 The committee recommends that privacy provisions which
may inhibit information flows between the ATO and APRA regulated superannuation
funds be reviewed and that the ATO seek advice from the Office of the
Australian Information Commissioner as to the extent to which protection of
public revenue exemptions in the Australian Privacy Principles might facilitate
improved information sharing.
The committee stands by these 2015 recommendations and encourages the
government to consider them, noting that as yet there has not been a formal
government response to the report.
The committee recommends that the ATO and ASIC increase their formal
cooperation with superannuation funds to coordinate measures around early
detection of non-payment of superannuation guarantee.
The committee recommends that privacy provisions which may inhibit
information flows between the ATO and APRA regulated superannuation funds be
reviewed and that the ATO seek advice from the Office of the Australian
Information Commissioner as to the extent to which protection of public revenue
exemptions in the Australian Privacy Principles might facilitate improved
Potential remedies to address SG non-payment
Single Touch Payroll
The committee received evidence indicating that the Single Touch Payroll
(STP) initiative would contribute to positive outcomes in terms of addressing
SG non‑payment. However, the committee also heard concerns that STP would
only be a partial solution owing to the proposed coverage of the roll-out.
The STP initiative was announced by the then Minister for Small
Business, the Hon Bruce Billson MP, and the then Assistant Treasurer, the Hon
Josh Frydenberg MP on 28 December 2014. STP requires the use of compatible
business management software to report tax and superannuation information in
the required format for digital transmission to the ATO.
STP aims to simplify taxation and superannuation interactions for
employers by aligning the reporting of PAYG withholding and SG payments with a
business'snormal process of paying their employees. STP will become operational
from 1 July 2017 and become mandatory for all employers with more than 20
employees from 1 July 2018.
Employers with 19 employees or less will also be able to use STP from 1 July
2017, but it will not be compulsory.
The Regulatory Impact Statement outlined the expected benefits flowing
from STP in regard to SG obligations:
Single Touch Payroll will assist the ATO to take earlier
action to protect honest businesses that do the right things and to support
those who may begin to struggle with meeting their obligations. In particular,
those business who do not fully comply with their PAYG withholding and
superannuation obligations enjoy a significant competitive advantage over those
that do fully comply, and Single Touch Payroll will allow us to identify and
support those who are struggling to comply much earlier.
The ATO informed the committee that its visibility of SG data would be
greatly improved with the introduction of the STP initiative:
Under the current design, Single Touch Payroll will provide
opportunities to identify the non-payment of SG by providing real time
visibility of SG liabilities and payments and will enable the ATO to
continuously monitor SG shortfalls at the employer and employee level.
The ATO further stated that this improved data visibility would allow it
to predict and monitor SG payment patterns for changes or any 'missed'
payments, meaning it would be able to implement more proactive and preventative
measures. The preventative measures given as examples in the submission
where the ATO can see that an employer pays SG near the due date,
SMS reminders could be sent;
where a predicted payment is missed, the ATO could contact the
employer before the SG due date; and
where an employer has an SG shortfall and has yet to lodge an SG
statement, the ATO can instigate action and in some cases issue a default
Although acknowledging that the STP initiative would improve the
availability of real time data, ISA raised concerns that the currently proposed
STP coverage would not capture the data of 45 per cent of Australian employees
who are employed by a small business employer (19 employees or less). ISA was
particularly concerned as this category of employees is identified by the ATO
as a cohort with a high incidence of unpaid SG.
The AIST expressed support for the STP initiative, as did Chartered
Accountants Australia and New Zealand. Both organisations recommended that the
initiative be expanded to cover all business employers, regardless of size,
citing that it would improve the ATO's ability to monitor SG non-compliance.
The TCFUA also recommended that use of STP be compulsory for all
employers, particularly given the high level of non-compliance with SG
obligations in smaller workplaces.
COTA also supported the extension of STP to all employers in due course.
Similarly, Cbus stated that while it was encouraged by the development
of the STP platform, its own experience indicated that the bulk of SG
non-compliance occurred in small businesses, which would not be covered by STP
under the current rollout. Cbus noted that nevertheless, STP offered a valuable
opportunity for government to engage with the community about the rights and
obligations surrounding superannuation.
Unions Tasmania informed the committee that with around 13 806
businesses in Tasmania employing between one and 19 employees (approximately 37
per cent of all Tasmanian businesses), STP as currently mandated would not
assist in protecting the approximately 100,000 employees of these small
businesses against SG non‑payment. Unions Tasmania recommended that the
operation of STP be extended to all businesses to ensure employees of small
businesses are not left behind.
The IGT also observed that the current anticipated coverage of STP would
have limited success in combatting the non-payment of SG, because it is not
mandatory for small or micro businesses, and it is within this category of
employer that SG non-payment is highest.
As such, the IGT suggested:
Accordingly, it would be beneficial to remove or reduce the
barriers to the adoption of STP by small or micro businesses even before they
are required to do so. For example, the ATO could consider a no or low cost
solution for these categories of employers or, in the case of those in remote
areas, an alternative to direct digital access could be explored.
The ATO submission stated that a pilot program will be undertaken in
2017 to examine the benefits for small businesses from STP and noted that a
decision by government on any STP expansion to small business employers is
expected after the pilot is completed.
The IGT also cautioned that while STP data would provide the ATO with
greater access to information about the payment of SG, it would not confirm
amounts received by superannuation funds. As such, the ATO would still need to
await payment information (from the Member Contribution Statement) before it
could fully verify compliance. The time gap before such reconciliation could be
conducted would increase the risk of non-recovery of unpaid SG.
In their report on phoenix activities, Professor Helen Anderson and her colleagues
at the Melbourne Law School observed that STP was initially proposed as a
mechanism for employers to pay their employees and related PAYG (W) remittance
and superannuation contributions. However, in response to concerns from the
business community, the STP proposal was later amended to only cover the
reporting of tax and superannuation obligations.
The report noted:
This alteration [to the scope of STP] was in response to
concerns from business about the 'cash flow' implications of having to pay the
taxes at an earlier time than is presently the case. In other words, while
wages are generally paid fortnightly, PAYG (W) and superannuation are usually
only remitted monthly or quarterly depending on the size of the business and
the terms of the super fund trust deed. The objection raised shows the extent
to which businesses rely on employee-related sums – 'their money' until it is
legally payable – to finance their businesses, and also shows the hesitation of
the government to interfere with this practice.
Professor Anderson and colleagues observed that STP as a reporting only
mechanism undermined its effectiveness (particularly in regard to so-called
'lockdown' DPNs) and recommended that STP instead require both the reporting
and payment of tax and superannuation obligation.
Similarly, ARITA recommended that steps be taken to directly link tax
and SG obligations for both reporting and payment to the employee's regular
payroll cycle. ARITA noted 'reporting alone under Single Touch Payroll will not
resolve problems with non-payment of SG and other taxes'.
The committee appreciates that the implementation of the STP initiative
has the potential to greatly assist in the identification and rectification of
SG non-payment within businesses of more than 20 employees, particularly in its
ability to provide the ATO with greater visibility of SG data.
However, the committee holds concerns that the current coverage of STP
misses out small business employers of 20 employees or less, and that this gap
in coverage will disadvantage small business employees, who are widely regarded
as particularly vulnerable to SG non-payment.
The committee is aware that a pilot program will be undertaken in 2017
to identify the benefits of STP for small businesses and is interested to see
the outcomes of this program.
The committee recommends that the government strongly consider
expanding Single Touch Payroll to all businesses, with equal consideration
given to how small businesses could be best supported in adopting the
initiative. The committee recommends that Single Touch Payroll apply to all
employees and contractors on an employer's payroll. The committee also
recommends that the government give consideration to whether STP should require
both the reporting and payment of tax and superannuation obligations.
Improved payslip reporting
The committee received evidence suggesting that improved payslip
reporting would promote compliance with SG obligations. In particular,
submitters recommended that employee pay slips include the actual amount of SG
paid to an employee's superannuation fund, rather than merely accrued.
Under the Fair Work Act and the Fair Work Act Regulations 2009
(Fair Work Regulations), employers are required to issue payslips to employees
and keep employment records. The prescribed details for these documents
includes information relating to the employment status of the employee, the
rate of remuneration, the number of overtime hours worked, and the
superannuation contributions that the employer is liable to make (or has made).
Regulation 3.46 of the Fair Work Regulations states:
If the employer is required to make superannuation
contributions for the benefit of the employee, the pay slip must also include:
- the amount of each contribution that the employer made
during the period to which the pay slip relates, and the name, or the name and
number, of any fund to which the contribution was made; or
- the amounts of contributions that the employer is liable
to make in relation to the period to which the pay slip relates, and the name,
or the name and number, of any fund to which the contributions will be made.
As a result of this regulation, there is a disconnect between the amount
of SG an employee sees listed on their payslip each pay cycle, and the amount
actually paid into their superannuation fund during that same time period.
Dr Tess Hardy outlined the impact of this disconnect:
While an employer is obliged to indicate on payslips the
amount of superannuation contributions accrued, it does not mean that this
amount is actually paid to the superannuation fund. In order to identify any
shortfall, an employee must compare the amounts stated on their payslips with
the statements issued by their superannuation fund. Given these statements are
often published on an annual basis, an employee may not be in a position to
detect any underpayment until almost 12 months after the payment was due.
Both ISA and Australian Super also observed that the four month delay
between an SG amount being accrued and noted on a payslip, and that amount
being paid into a fund, makes it difficult for an employee to check whether
they have been paid correctly. As such, ISA recommended that the Fair Work Act
and its associated regulations be amended to require payslips to state the SG
amount paid to an employee's superannuation fund, rather than just the amount
due. Australian Super also supported this policy suggestion.
The AIST stated that it supported improved payslip disclosure that
included details of the amounts of SG accrued, as well as the planned and
actual payment dates of SG contributions.
Similarly, the TCFUA proposed that all employers be required to include
the following information on each payslip in order to improve the ability of an
employee to check their SG has been properly paid:
the amount of the superannuation contribution required to be made
(including any additional amounts above the SG percentage required under an
industrial instrument or contract);
the amount of compulsory superannuation actually paid and the
date of the payment;
the amount of any voluntary superannuation authorised to be
deducted from the employee's wages; and
the amount of voluntary superannuation and the date of the
However, the Department of Employment informed the committee that due to
the design of the current SG system in regard to payment timings, any changes
to payslip reporting would be of limited effect:
Requiring payslips to record actual superannuation guarantee
contributions may confuse employees. It would result in payslips generally
recording a $0 contribution, except the four times a year when a superannuation
guarantee contribution is required to be made. Requiring payslip reporting
would only make material difference if superannuation payments were aligned
with when payslips were issued. There would be compliance costs as employers
would generally need to update payroll software.
The committee is strongly of the view that improved payslip reporting of
SG will increase the capacity of employees to keep track of their SG and raise
the alarm early in the case of non-payment. The continued improvements in
electronic record management, as well as data transfer options, should be
utilised to their full potential in this regard.
The committee recommends that the Fair Work Regulations 2009 be amended
the amount of earnings that the SG is calculated on;
any voluntary superannuation contributions due;
compulsory SG due; and
all amounts of superannuation (both voluntary and compulsory)
paid into an employee's superannuation fund (rather than just the amounts
The committee understands the concerns raised by the Department of
Employment that at any amendments to payslip reporting would only make a
material difference if SG payments were aligned with pay cycles, and that there
would be compliance costs to update payroll software. However, the committee
believes that given the SG is part of an employee's remuneration, it is
entirely justified that they are provided with this level of information.
Without such information, employees are far less likely to be able to determine
whether or not they are being paid the correct SG amounts.
As such, the committee suggests that Recommendation 32 be taken in
conjunction with the Recommendation 5 in chapter 5 suggesting SG payment be
aligned with pay cycles.
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