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Australia To Close Super Guarantee Loophole

Friday, July 14, 2017

The Australian Government has said it intends to close a superannuation guarantee (SG) loophole that affects employees who make salary sacrifice contributions into their superannuation accounts.

Revenue Minister Kelly O'Dwyer said that the Government will introduce legislation later this year to ensure that an individual's salary sacrifice contributions do not reduce their employer's SG obligation.

She commented: "If Australians are to continue to have confidence in the integrity of the superannuation system, we must ensure employers are paying workers their full entitlements, whether they are wages or superannuation."

The loophole was of one of a number of issues identified by the Superannuation Guarantee Cross-Agency Working Group. Set up in December 2016, it has now released its final report.

Generally, if an employer pays an employee AUD450 (USD349) or more before tax in a calendar month, they must pay a minimum amount in superannuation. The SG is currently 9.5 percent of an employee's ordinary time earnings.

The Working Group said that the Superannuation Guarantee (Administration) Act 1992 should be amended to include in the base for calculating an employer's SG guarantee obligations those salary or wages sacrificed to superannuation as part of salary sacrifice arrangements. It also argued that employers should not be able to use a sum sacrificed by an employee to superannuation to satisfy their SG obligation.

The Working Group also made the following recommendations:

  • All businesses (including small businesses) should be required to comply with the ATO's Single Touch Payroll legislation, which is due to commence for businesses with 20 or more employees from July 1, 2018;
  • Superannuation funds should be required to report detailed contributions payment information more frequently than the annual reporting currently required;
  • Enhancements should be made to the Director Penalty Notice regime and to the Security Bonds regime, to improve the framework for SG compliance and the collection of SG charge debts;
  • The Government should ensure that the penalty framework surrounding SG is sufficiently flexible to deal with the spectrum of employer culpability in non-compliance; and
  • The ATO should inform employees of its actions to collect their SG.

The Government is considering the Working Group's recommendations.