Penalty free zone for unpaid super a disgrace

Posted: Thursday 25 October, 2018

Industry Super Australia has called for an urgent overhaul of current penalty regime for unpaid super after a Senate Estimates Committee heard late yesterday that as many as 8 out of 10 employers have gone unpenalised for failing to pay super on time.

Under questioning from Senator Chris Ketter, deputy chair of the Senate Economics Committee, the Australian Taxation Office confirmed it:

  • Routinely fully waives all penalties for late payment of super (under Part 7 of the Superannuation Guarantee Administration Act);
  • Hasn’t levied a SINGLE 200% maximum penalty in the last five years;
  • Has even inappropriately waived a nominal $20 per employee administrative fee penalty up until 2017;

The concessions came after data presented to the committee by the ATO revealed just 5,296 ‘Part 7 penalties’ were applied to 24,634 employers in the ATO’s sights for failing to comply with the law by paying the correct super on time.

Industry Super Australia Deputy Chief Executive Matt Linden said the revelations suggest there is a basic failure to enforce the law which is very likely contributing to the problem.

“The wholesale waiver of statutory penalties prescribed under the law for failing to pay super on time is a green light to unscrupulous employers short-changing their workers’ super.

“The available penalties, which are equivalent to double (200%) of an employer’s super shortfall, are not acting as a deterrent if employers can agree to pay late and have penalties waived.

“The ATO’s so called ‘practical compliance approach’ is causing a textbook moral hazard where employers take the risk knowing they won’t be caught or even if they are simply pay what they should have paid anyway (with nominal interest) and walk away.

“This approach is undercutting the majority of employers who do the right thing and pay the correct amount on time.

“There must be minimum mandatory penalties unless there are exceptional circumstances such as natural disasters and other instances beyond the control of employers.

“The $20 per employee administrative penalty which the ATO is now apparently applying as a minimum is wholly inadequate and not even a parking ticket penalty.

“This $6 billion a year problem affecting one in three employees will continue to spiral out of control with such weak penalty enforcement,” Mr Linden concluded.

Matt Linden is available for interview. Media contact: Phil Davey 0414 867 188

Industry Super Australia provides policy, research and advocacy on behalf of 16 not-for-profit Industry SuperFunds who are the custodians of the retirement savings of six million Australians.