This chapter summarises the views held by stakeholders on the provisions of the bill. The chapter is intended to provide an indicative, though not exhaustive, account of the issues examined during the committee's inquiry.
The committee notes that there was a mixed level of support for the bill among inquiry participants; as such, this chapter will examine evidence received in support and opposition to the bill in turn, followed by a brief discussion of other matters raised during the course of the inquiry.
Comments in support of the bill
The Association for Superannuation Funds of Australia (ASFA) expressed its support for the one-off superannuation guarantee (SG) amnesty, noting that there has been an increase in employers paying outstanding SG contributions since the announcement of the measure.
Mr Glen McCrea, Deputy Chief Executive Officer and Chief Policy Officer at ASFA, highlighted that, while positive measures have been recently introduced to address SG non-compliance moving forward, the SG gap is still significant:
…in 2015-16 alone around $2.8 billion was unpaid. Clearly more needs to be done to address historical non-compliance and, most importantly, ensure that individuals receive their money in their super account…Getting employees the money owed to them will mean higher super balances, additional investment returns and a better retirement for Australians.
When questioned by the committee regarding the estimated amount of superannuation to be recovered as a result of the amnesty, Mr McCrea told the committee:
My view is that every dollar counts, and the more money we can get in peoples' super the better, and the better quality their retirement will be. As I said, I think this is one element of a broader package, particularly going forward with some of the reporting work, event based reporting. We are open to further action going forward, but let's resolve this issue of an amnesty, see how that goes, and then see what other options there are to make sure people get the money in their super accounts.
Also noting the recent measures introduced by the government to address
SG non-compliance, Dr Craig Latham, Deputy, Australian Small Business and Family Enterprise Ombudsman (ASBFEO), took the view that the amnesty will create 'a level playing field, getting people squared up and superannuation paid'. Dr Latham further commented:
Getting squared up—a twofold effect: first and foremost it is about getting the employee entitlements paid and also having all businesses then compete on a level playing field. The Single Touch Payroll, going forward, is there to assure compliance following the amnesty.
Noting that the majority of employers seek to comply with SG laws and fulfil obligations to their employees, Chartered Accountants Australia and New Zealand (CAANZ) expressed the view the amnesty will encourage employers to 'audit their Super Guarantee compliance and fix any identified underpayment issues'. CAANZ further submitted that:
In the years ahead Chartered Accountants ANZ expects the ATO will keep a very watchful eye over those employers who avail themselves of the amnesty.
The Financial Services Council (FSC) noted its support for policy measures aimed at ensuring workers received their full SG entitlements, contending that overall, the measures in the bill 'will help reunite workers with their unpaid superannuation and support the integrity of the superannuation system'.
Reiterating the FSC's support for the bill, Ms Jane Macnamara, Senior Policy Manager, Superannuation and Retirement Incomes, told the committee that 'while it [the bill] provides relief from penalties, it does not remove any obligations for employers to pay their employees the superannuation they are owed'.
Comments in opposition to the bill
Comments in opposition to the bill focused mainly on two issues; the message that may be sent by the amnesty should it be introduced, and a lack of support in academic literature for the efficacy of amnesties.
Message sent by proposed amnesty
A number of inquiry participants expressed concern that the one-off SG amnesty risks sending the wrong message to employers; specifically, that it could give the impression of rewarding rather than penalising non-compliant employers.
For example, Mr Scott Connolly, Assistant Secretary of the Australian Council of Trade Unions (ACTU), contended that the proposed amnesty:
…says to every employer who didn't pay super to their staff on time that that's okay, so long as it occurred before March last year. It also says to the vast majority of employers—who did pay the super, did obey the laws of this country and did bother to do the right thing by their employees—that perhaps they really shouldn't have bothered at all.
In support of this view, Unions Tasmania argued that the amnesty 'sends a message to employers that they can disregard Australia's superannuation laws without consequence'.
Ms Jo-Anne Schofield, National Secretary of United Voice, noted that employers who have not paid SG entitlements on behalf of their employees, aside from their wilful blindness of the law, have effectively received a financial advantage. Ms Schofield suggested that an amnesty would signal to employers, particularly those in contracting industries, that SG
non-compliance can be overlooked.
Ms Schofield further explained:
In these sectors, non-compliant employers can and do acquire market share from those companies that are meeting all of their award and superannuation obligations to their workers. The compliant companies are effectively undercut. They are penalised out of the market for doing the right thing. On the other hand, non-compliant companies make a gain. Due to the amnesty, those companies will escape penalties that would otherwise apply to them. It sends a signal in markets such as contracting sectors that practices of non-compliance can be overlooked through future amnesties.
The Australian Institute of Superannuation Trustees (AIST) took the view that 'government support should be provided to the majority of employers that want to meet their superannuation obligations', further submitting that an amnesty 'undermines the support provided by the ATO to employers wanting to fully comply with their legal obligations'.
AIST also cautioned that an amnesty may send a message that the government is not committed to enforcing SG obligations, noting that:
In Australia, there is widespread public support for employers to pay the superannuation entitlements of their employees, and opposition to wage theft by employers.
While the Government supports these views of the public, attempts to introduce an amnesty confuses this message.
The ACTU asserted that the amnesty proposed in the bill goes against the
well-established principle that ignorance of the law is not a defence, elaborating that:
The Superannuation Guarantee Charge (SGC) has been law since
1 July 1992. Businesses cannot believably claim ignorance of the SGC when and where it applies to them. The SGC is not a unique obligation upon employers. Wages, workplace entitlements, business tax, licensing are all incumbent upon the business owner to comply with. To claim that
non-payment of superannuation is too difficult by comparison and therefore an amnesty is warranted, is absurd.
AIST expressed a similar view, observing that '[f]or 27 years it has been mandatory for employers to pay super for their employees. This isn't a new requirement, and it's not a requirement that they don't understand'.
Efficacy of amnesties
Some submitters and witnesses pointed to academic literature on the efficacy of tax amnesties, arguing that overall, research has not found amnesties to be an effective a mechanism to increase compliance.
For instance, AIST submitted that:
Criminology literature shows that offenders become increasingly scared of detection and fines when the time of detection and punishment approaches. Offenders behave differently when they decide to offend
(e.g. by not paying super entitlements to their employees) compared with when they have to face the consequences of their actions (e.g. when the ATO identifies their non-compliance). Potential offenders can calculate the benefits of initial non-compliance against the risk of prosecution and may decide to offend if they believe they may be able to avoid prosecution
(e.g. as a result of an amnesty).
Industry Super Australia (ISA) described the academic evidence on the efficacy of amnesties as being mixed at best. In particular, ISA noted an International Monetary Fund study into income tax amnesties which found:
…programs that combine both ‘carrot’ and ‘stick’ approaches—i.e. incentives along with a strengthening of enforcement regimes—are more likely to succeed.
While it acknowledged the provisions in the bill which limit the Commissioner's ability to remit Part 7 penalties, ISA suggested that:
In light of such findings, securing compliance will likely be better achieved by placing greater emphasis on the ‘stick’: in this case, making more effective use of the penalty regime covering employers who engage in
non-compliance. The law currently allows for the imposition of significant penalties on employers who do not meet their SG obligations. However, in the period from the introduction of the current maximum penalty to
10 April 2019, the ATO has not imposed a maximum penalty of 200 per cent on any employer for failing to pay the SG. The Bill, as it stands, does not address this.
Complement to the SG Integrity Package
Acknowledging the views of some parties that an SG amnesty would 'reward bad behaviour', some inquiry participants sought to emphasise the fact that the one-off amnesty is intended to complement the SG compliance reforms contained in the government's Superannuation Guarantee Integrity Package, recently enacted through the Treasury Laws Amendment (2018 Measures No. 4) Act 2019.
Mr McCrea from ASFA suggested that it will be the combination of SG integrity measures that will have a positive benefit on overall SG compliance, commenting that '[a]t the moment we've got some policies addressing the stock issue, we've got some initiatives in the flow, and we think things like event based reporting are very positive'.
Similarly, Mr Robert Jeremenko, Division Head, Retirement and Income Policy Division, Department of the Treasury (The Treasury), sought to clarify the role of the amnesty as part of the wider suite of SG integrity measures:
The combination of the amnesty, which, as some of the witnesses have given evidence on already today, is a backward-looking measure. The package of measures that has been passed by parliament and which gives those extra powers to the tax office and introduces single touch payroll is very much from that date forward.
As part of the combination of the retrospective nature of the amnesty and the forward-looking nature of the already-passed extra powers, that is the suite of policy options that the government has put forward which aims to address both that SG gap and then tries—through this one-off, unusual amnesty—to bring forward that extra $230 million, which is superannuation that people don't have currently.
Mr James O'Halloran, Deputy Commissioner, Superannuation and Employer Obligations, Australian Taxation Office (ATO), also sought to assure the committee that, in regard to addressing historic SG non-compliance, the ATO's SG audit program will continue to run should the bill be passed and the proposed amnesty come into effect.
Other matters raised
Application of the amnesty in practice
At the public hearing for the inquiry, the committee sought clarification as to how the amnesty would be applied in practice. Specifically, noting the long time frame—26 years since the SG Act was introduced—to which the amnesty relates, the committee questioned how the amnesty would be applied in situations where an employer's records are incomplete, or indeed, non-existent.
Mr O'Halloran from the ATO advised that:
…if the amnesty law lands as currently drafted, it's not an unusual situation. It's obviously got some legislative elements in it. But our normal position, as always, is that we often receive voluntary disclosures from people who have applied their best endeavours. We look at it at different degrees, but certainly the message that the law seems to impose is that people are encouraged to come forward. They should come forward. It's not to be a cavalier exercise. Therefore, it's more likely than not that we would accept what they bring forward, because we may not have records back that far either in some instances. We will obviously provide information and advice as to the sorts of sources of information that should be available. I make the point clearly that there may be circumstances where people perhaps can't identify former employees and the like. That's probably the closest one. Obviously, we can't distribute money unless we can identify the employee. We'd just be there to help people find out how we can meaningfully support the amnesty application for the period about which they've come forward, where we can facilitate it as opposed to interrogate it.
Mr Jeremenko from The Treasury outlined the policy rationale for the amnesty as proposed in the bill covering the entire 26-year period since the commencement of SG Act:
…this is the first time there's been a superannuation guarantee amnesty. It's a one-off, as the minister has said a number of times publicly, and as I said again today. One way of interpreting the large period of time is that, because it hasn't happened before, to do otherwise—to shorten the period of time by which employers can confess, if you like, to not paying the SG—would potentially rob the workers of the super that they would be owed.
Some inquiry participants expressed the view that the amnesty period as proposed in the bill—starting on 24 May 2018 and ending 6 months after the bill receives Royal Assent—should be extended.
For example, the ASBFEO contended that the application of the amnesty only to historical SG debts up to and including the quarter ending March 2019 should be reconsidered. The ASBFEO reasoned that:
Six reporting quarters have since passed and those small businesses waiting for certainty in the law are still waiting. Accordingly, the amnesty should be extended to all historical quarters up to the end of the quarter in which the legislation receives Royal Assent.
CAANZ presented a similar view, submitting that '[g]iven the original amnesty period was not legislated we believe the proposed new amnesty period should ideally be longer than six months after the proposed legislation receives Royal Assent'.
Likewise, the Housing Industry Association (HIA) noted that there is now a longer period of time to which the amnesty will not apply than was envisaged in the original legislation. HIA recommended that a similar approach be taken to when the legislation was introduced during the previous parliament; specifically that:
..the amnesty apply for a period of 12 months from 19 September 2019, the day the Bill was introduced, and apply to a quarter that ends at least
28 days before the start of the amnesty period being up to and including the quarter starting on 1 April 2019. An employer would not be able to benefit from the amnesty relating to a quarter starting on 1 July 2019 or subsequent quarters.
Penalties under the Tax Administration Act 1953
In its submission, Hall & Wilcox raised concerns that, while the proposed amnesty would provide employers with reduced liability to penalties under Part 7 of the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992), the bill and Explanatory Memorandum are silent on the application of penalties imposed under subdivision 284-B of schedule 1 to the Tax Administration Act 1953 (TAA 1953) for false or misleading statements to the Commissioner.
In particular, Hall & Wilcox noted that:
Section 59 of the SGA Act does not capture employers who have previously lodged a superannuation guarantee statement with the Commissioner and are now seeking to amend that earlier statement, as there has not been the requisite failure to lodge. This is the case even if that amendment would result in the employer having an increased liability to SGC.
Where an employer seeks to amend a past superannuation guarantee assessment, and that amendment results in an increased liability to SGC, the penalty regime in Subdivision 284-B of Schedule 1 to the Administration Act for the making of false or misleading statements to the Commissioner will apply.
Hall & Wilcox suggested that the application of the above penalties under the TAA 1953 is a significant flaw in the drafting of the bill, further commenting that:
It does not seem fair or consistent with the intent of the amnesty, that employers who have failed to lodge superannuation guarantee statements for past periods would be protected, while those seeking to amend an assessment are not.
The committee sought clarification from The Treasury on the above matter raised by Hall & Wilcox in its submission. The Treasury subsequently advised that:
The ATO has advised that in all but the most egregious cases (for example, where an entity has intentionally made repeated false statements which result in very large SGC shortfall amounts), where an employer makes a voluntary Amnesty disclosure as provided for under the Bill, s284-75 penalties will not be applied by the Commissioner—they will be remitted in full.
Advertising the amnesty
The importance of advertising the one-off amnesty to ensure that the full utility of the measure is realised was raised in a number of submissions.
One submitter, for example, contended that a plain English advertising campaign should be put in place to 'maximise awareness and engagement by employers with this measure'. They also suggested that as well as the advantages of the amnesty, any such advertising should highlight the consequences for employers of not coming forward during the amnesty period:
The incentives for employers to take advantage of this Amnesty are significant but the ATO should also advertise the consequences of not making a disclosure as part of this Amnesty and signal its intent to target employers who choose not to take advantage of it, to the extent that such employers would have been aware of a superannuation guarantee liability.
The ASBFEO shared a similar view, submitting that advertising around the amnesty measure and related penalties should be targeted at the small business community:
Further, we strongly suggest the proposed change in the Commissioner's power to remit penalties be publicised and promoted amongst the small business advisor community. Together with the amnesty applying to SG contributions for an additional eighteen months, small business will be well placed to bring their employee entitlements up−to−date and move forward with confidence.
Superannuation is critical to ensuring hard working Australians are financially supported throughout their retirement. The non-payment of an employee's full superannuation guarantee entitlements can have a significant detrimental impact on the retirement living standard of the employee concerned.
The committee heard evidence that the one-off amnesty will leave no workers worse off and will result in more individuals receiving their full entitlements than would do so if the amnesty was not in place. Therefore, in combination with the government's forward-looking compliance reforms (including Single Touch Payroll and event-based reporting), the committee is confident that the one-off amnesty provides the best opportunity to address historical superannuation guarantee non-compliance.
The committee is encouraged by recent ATO figures which show that the superannuation guarantee gap has significantly decreased on previous years to an amount of approximately $2.3 billion. This decrease in the superannuation guarantee gap can be attributed, at least in part, to the more than 7000 employers that have come forward to voluntarily disclose historical unpaid superannuation since the one-off amnesty was first announced. In the committee's view, this significant level of disclosure, even prior to the legislation being enacted, is a strong indication that the amnesty will achieve its projections of recovering over $230 million in superannuation for employees who would have otherwise missed out.
The committee considers that, given the extension of the amnesty period since the legislation was first announced, employers have been provided with a significant amount of time in which to get their affairs in order, and that a longer amnesty period is not needed.
Finally, whilst the committee notes the importance of ensuring that employees receive their full entitlements, the committee is also cognisant of perceptions that some employers have potentially benefited from superannuation guarantee non-compliance, and indeed, that such employers will now be released of punitive actions as a result of the amnesty. Accordingly, to best ensure the success of the amnesty, the committee recommends that the ATO develop and implement a communication strategy to maximise employer awareness and engagement with the superannuation guarantee amnesty.
The committee recommends that the Australian Taxation Office develop and implement a communication strategy to maximise employer awareness and engagement with the superannuation guarantee amnesty.
The committee recommends that the bill be passed.
Senator Slade Brockman