Mr Taxman
Change the way you feel about taxes.
Get informed and discover what the taxman doesn't want you to know.
Sharing it with Australia, Mr Taxman is a regular Woman’s Day columist and TV finance commentator
  • click to visit Mr Taxman on Twitter
  • click to visit Mr Taxman on FaceBook
  • rss

Unpaid super tally hits $3.6 billion: Are you paying your employees’ superannuation correctly?

Dec 05, 2016

Businesses should review their obligations for compulsory superannuation contributions or potentially suffer the consequences, say experts, as a spotlight is shone on the $3.6 billion of unpaid super across the nation.

On its last sitting day on Thursday, the Senate referred the non-payment of superannuation guarantee contributions by Australian employers to the economics references committee for review in 2017. Superannuation groups have been busy modelling the scale of these non-payments, with a report from Industry Super Australia (ISA) and industry super fund Cbus released over the weekend pinning the value of unpaid super at $3.6 billion in 2013-14.

The report was completed by former Treasury official Phil Gallagher, who believes the $3.6 billion figure is “conservative”. The report highlights underpayment in the building and hospitality industries in particular, claiming the Australian Tax Office has to date been too laid back in pursuing businesses that fail to comply with the 9.5% employee super payments required by Australian law.

Over the past two years a number of studies have revealed that Australian SMEs are not focused enough on retirement planning, are sometimes tempted to put off contributing to their own superannuation and can be confused about their obligations to other staff members, particularly when employees volunteer to forgo their super. But experts warn that businesses must be vigilant in key areas of confusion, because the consequences can cost you.

Key concerns: Contractors and loopholes

The ISA report draws attention to the tendency of some businesses to incorrectly classify employees as contractors so as to avoid paying superannuation and other conditions – and that this problem increases or decreases depending on wider employment conditions.

However, David McKellar of Allied Accountants told SmartCompany that while businesses might not have to pay super contributions for a sole contractor for certain types of work, too often businesses continue to classify a worker as a contractor even after their role has come to fit the characteristics of an employee.

“In these cases, both the employer and contractor might not know there’s a liability there,” McKellar says.

The Fair Work Ombudsman directed SmartCompany towards its checklist for classifying employees and independent contractors, highlighting that contractors need to use their own equipment to complete work, work to a specific project outcome rather than on an ongoing basis, and have a high level of control over how the project is completed.

“The main thing is if the majority of the work is provided in the labor, not materials, provided by a person, then in all likelihood and most probability they will need to pay super,” senior lecturer at Deakin Business School Dr. Adrian Raftery says.

If a business owner is unsure about their responsibilities, the ATO also has a tool to calculate payments, but Raftery says some employers may be advised to pay the super guarantee to avoid facing fees for non-compliance later.

“If anything, err on the side of being conservative.”

One “loophole” the ISA report highlights as a key issue is around employees volunteering to salary sacrifice some of their wage into super. Under the current regulations, an employer is able to count this amount as part of the 9.5% that it pays into a worker’s super. However, super groups view this as contributing to further issues down the line, with many Australians already stressing over whether their retirement savings will see them through to the end of their lives.

“With access to government pensions tightening and home ownership in decline, future generations of retirees will be increasingly reliant on superannuation,” the report says.

What small businesses need to know

Small business owners have reported that they’re behind in their own retirement planning for a variety of reasons, from uncertainty over the future of the Coalition’s now-passed super changes to issues with cashflow that see them pay the business’s costs before paying themselves.

However, the costs of not upholding your obligations on super in smaller businesses can be high – even if the only person you’re not paying is yourself. While sole contractors don’t have the same requirements, the minute you operate as a business, you have to uphold your obligations, even if staff have volunteered to forgo super, says Raftery.

“Ethically, these small businesses who are struggling with super say, ‘I’ll pay all the other employees first’ and will be a bit more slack with themselves,” he says.

This is problematic because the fees that the ATO charge for late payments apply even if a business owner has chosen not to pay themselves.

The ATO highlights the interest charges that get applied when a business fails to pay the super guarantee on time.

“It’s essentially a penalty on each quarter that you’re late – however much super that you should be charging plus an interest rate of 10%, plus an admin fee per employee, per quarter,” says Raftery.

“The other thing that is really important is that if you get hit up with the super guarantee charge, you cannot claim that as a tax deduction.”

McKellar says for those in small family businesses, there’s only really one scenario where super contributions don’t need to be paid.

“The only way around it would be perhaps if someone is working for no payment,” he says.

Other than that, you must pay up. And while business owners might feel stress in the short term, when it comes to their own retirement planning, paying themselves is the best choice for tax planning, says Raftery.

“There’s a legal obligation and if you don’t pay your own and the ATO does its investigation, they won’t treat you any differently than a independent employee,” he says.

“But for their tax incentives it’s to their advantage to pay into super – otherwise they’re just being taxed at the corporate tax rate.”

The inquiry into superannuation payments will look at the accuracy of data collected by regulatory bodies around the value of payments made, as well as the ATO’s approach to compliance.

Submissions to the inquiry are open until February 17, with a view to report by March 22, 2017.

 

Original article published in Smart Company.com.au on 5 December 2016

 

Comments

"My heart was falling apart, my emotions were dying slowly, i was gradually losing my beauty, All because the man I got married to 4 years back was no longer the same man again, he started going out with women, drinking in all the bar, all he was saying was we need to get a divorce ASAP that I look old to him, I cried my life, i begged him yet all he was saying was the same divorce, now until I found how people were talking about a love doctor who has helped so many people to get their lovers back so I made no hesitation to contact him via his WhatsApp (+2348100368288) and also wrote a mail to him on his Email: (Priestazibasolutioncenter@gmail.com) before I finished telling him my problems, he already told me all about my life, I was very surprised, and he told me what to do in the process for the love spell and in less than 48 hours everything was ready, he sent me a package and I did as he said so at night I was on my bed sleeping when I saw my husband kneeling down at my front begging for me to forgive him, I thought it was a dream till today, I am so regretful to you Priest Aziba, please anyone goes through sure problem should contact Priest Aziba for your solution before it become too late for you. DR Email:Priestazibasolutioncenter@gmail com DR WhatsApp: +2348100368288 "

By: Lucy on Jun 29, 2019 12:20PM

Post a New Comment

Media Availability

Are you interested in booking Mr Taxman for a speaking engagement or requesting his viewpoints for an article?

comments-rhsLatest Comments

  • "I'm Roseline Cod, from Los Angeles USA. I contacted HIV in 2010, I was told by my doctor that there's no possible cure for HIV. I started taking my ARV's, My CD4 was 77 and viral load was 112,450. I..."

    By: roseline cod at Aug 24, 2019 1:33PM

    Post: Marriage

  • "Please visit (http://dradodalovetemple.com) and also contact Dr.Adoda if you need a powerful love spell to fix your broken relationship..... I got a divorce from my husband when I was six months..."

    By: CASSEY at Aug 24, 2019 12:42PM

    Post: Do your tax in under 30 minutes, then spend the refund wisely

  • "REAL AND POWERFUL LOVE SPELL THAT WORK FAST AND EFFECTIVELY https://ancientspiritspellcast12.wordpress.com Hello everyone i know there is someone somewhere reading this,My name is Dena Cruz from..."

    By: Dena at Aug 24, 2019 9:52AM

    Post: Do your tax in under 30 minutes, then spend the refund wisely

  • "My name is mary anna I want to testify of the good work of Dr.Bello who helped me in achieving the goals, i was in a relationship for 4year with my boyfriend and everything was going so sweet i..."

    By: maryanna at Aug 24, 2019 8:58AM

    Post: Marriage

  • "POWERFUL LOVE SPELLS AND LOST LOVE SPELLS TO BRING BACK LOST LOVER +2348118829899 USA, UK, FRANCE, CANADA, AUSTRALIA, NETHERLANDS, AUSTRIA, BELGIUM, IRELAND. I've gotten back with my ex boyfriend..."

    By: Donna Kelvin at Aug 24, 2019 8:29AM

    Post: Marriage