Superannuation Guarantee (SG) contributions paid by employers is key to a person’s retirement plan but some penalties for non-compliance may be detrimental to small business and there may be more red tape on the way, according to the Institute of Public Accountants (IPA).
IPA chief executive Andrew Conway said there is no doubt that employers should be making timely and accurate superannuation contributions on behalf of their staff but some penalties associated with late payments and non-compliance are draconian to say the least.
“The imposition of punitive costs on employers who pay their SG contributions late or in part can be extremely damaging on a small business struggling with cash flow issues,” said Mr Conway.
If the employer does not pay the correct amount of SG contributions on time, it can be deemed as a shortfall and onerous charges are imposed, according to Mr Conway.
“This consists of the total of the employer’s individual SG shortfalls for each employee and attracts further nominal interest and administration fees for that quarter,” he said.
“To add further insult, employers are then asked to calculate SG contributions and SG charges on a different basis to the norm which adds further compliance complexity to the employer. This calculation can actually make the shortfall higher. And worse, all of the above is non-deductible.”
Mr Conway said the issue is further compounded where an employer doesn’t lodge an SG statement or provide information to the commissioner then they are also liable to pay the additional SG penalty at a rate of up to 200 per cent of the SG charge payable.
“By all means, hit the recalcitrant employers hard which is where some of the new proposed measures are aimed at [including] education, imprisonment and direction to pay. Repeat offenders that are doing the wrong thing by their employees should be dealt with but let’s get human, and do not tar every small business with the same excessive compliance brush,” he said.
“A more measured approach is required for genuine late payers than the current penalty regime allows.”
Mr Conway’s comments come just weeks after Revenue and Financial Services Minister Kelly O’Dwyer unveiled tougher penalties for SG non-compliance, which will be enforced by a new Director Identification Number (DIN).