Legislation which proposed to simplify the superannuation guarantee (SG) regime for small businesses and reduce penalties for non-compliance has been scrapped.
Last week, The Treasury Legislation Amendment (Repeal Day 2015) Bill 2016 was passed by the House of Representatives with two opposition amendments.
The amendments removed ‘Schedule 1’ from the Bill, which proposed to simplify the SG charge and make the SG charge and penalty more proportionate to the non-compliance.
The SG charge was to be simplified by aligning the earnings base for calculating the SG charge (currently salary or wages) with the earnings base for calculating SG contributions (ordinary time earnings).
There have long been calls from the small business community to address the “onerous penalty regime.”
“Currently the SG is worked out based on the employee’s salary and wages which is a broader base than ordinary time’s earnings. We recommend moving to a single base for calculations, which will simplify the process for employers to comply with their super obligations,” said the Institute of Public Accountants’ chief executive Andrew Conway in September last year.
Speaking to My Business's sister publication SMSF Adviser, DBA Lawyers director Daniel Butler noted that the penalties associated with the current regime “can put employers out of business very quickly.”
“It’s known to make employers insolvent and render them bankrupt. These are huge penalties we are talking about,” he said.
Mr Butler, who has long been lobbying for the reformation of the SG system, also labelled the current set-up a “business survival risk.”
“There’s need for the SG system to be simplified and reformed, in particular the penalty regime needs to be made far more flexible because as it is, it’s extremely inflexible,” he said.
“It’s not the first time this has been complained about. The system is way out of step.”