Introductory Info
Date introduced: 28 March 2018
House: House of Representatives
Portfolio: Treasury
Commencement: Refer to pages 3 and 4 of this Digest for details.
Purpose of the Bill
The primary purpose of the Treasury
Laws Amendment (2018 Measures No. 4) Bill 2018 (the Bill) is to amend laws
relating to superannuation to improve the integrity of the Superannuation
Guarantee (SG) system and to improve pay as you go (PAYG) withholding tax
compliance. The Bill would also allow the Australian Taxation Office (ATO) to share
Tax File Numbers (TFNs) with other government departments in certain
circumstances, adds additional charities to the list of Deductible Gift
Recipients (DGRs) and makes a number of other minor technical amendments to
taxation laws.
Structure
of the Bill
This Bill is divided into nine Schedules:
- Schedule
1 is divided into three parts:
- Part
1 amends the Taxation
Administration Act 1953 (the TAA) to allow the
Commissioner of Taxation (the Commissioner) to issue a direction to an employer
to pay an unpaid superannuation guarantee charge (SGC) amount and introduces a
new offence and penalties for failing to comply with such a direction.
- Part
2 amends the TAA to allow the Commissioner to issue a direction to an
employer to undertake a specified approved course of education about the
employer’s superannuation obligations and introduces new offences and penalties
for failing to comply with such a direction.
-
Part 3 makes consequential amendments to the TAA and
the Administrative
Decisions (Judicial Review) Act 1977.
- Schedule 1 will commence on the
first 1 January, 1 April, 1 July or 1 October after Royal Assent.
- Schedule
2 amends the TAA to allow, in certain circumstances, for an officer
of the ATO to disclose to an employee that their employer has failed to pay
their superannuation obligations in respect of that employee. Schedule 2 will
commence on the first 1 January, 1 April, 1 July or 1 October after Royal
Assent.
- Schedule
3 is divided into two parts:
- Schedule
4 is divided into three parts:
- Part
1 amends the TAA to allow the Commissioner to provide a grace period for
superannuation providers who make false or misleading statements.
- Part
2 removes a requirement for employers to disclose information on their employee
SG contributions as the ATO can obtain this information directly from
superannuation funds.
- Part
3 amends the Superannuation
(Unclaimed Money and Lost Members) Act 1999 (SUMLMA) to remove
the requirement for superannuation funds to provide biannual reports to the ATO
on lost superannuation amounts.
- Schedule 4 will commence on the
first 1 January, 1 April, 1 July or 1 October after Royal Assent.
- Schedule
5 is divided into three parts:
- Parts
1 and 2 amend the TAA to enhance the director penalty regime for
directors who fail to meet their SG or PAYG withholding obligations.
- Part
3 amends the TAA to allow the Commissioner to seek a court order to
compel an entity to provide a security deposit in relation to a tax related
liability.
- Schedule
5 will commence on the first 1 January, 1 April, 1 July or 1 October after
Royal Assent. Schedule 6 amends the Income Tax
Assessment Act 1936 (ITAA36) and the TAA to allow
a taxation officer to provide tax file number (TFN) and other information to an
employer in order to streamline the process of new employee commencement. Schedule
6 will commence retrospectively on 1 July 2018.
- Schedule
7 amends the https://www.legislation.gov.au/Series/C1936A00027ITAA36 to allow the Commissioner to share and
verify TFN information with various Commonwealth agencies. Schedule 7
will commence on the first 1 January, 1 April, 1 July or 1 October after Royal
Assent.
- Schedule
8 makes a number of minor miscellaneous amendments to existing tax and
superannuation laws. Part 1 of Schedule 8 will commence retrospectively on 28
November 2012. Part 2 will commence retrospectively on 1 January 2018. Parts 3
and 7 will commence on the day after Royal Assent. Parts 4 to 6 will commence
on the first 1 January, 1 April, 1 July or 1 October after Royal Assent.
- Schedule
9 amends the ITAA97 to specify three new DGRs, Australian
Philanthropic Services Limited, Foundation 1901 Limited and Sydney Chevra
Kadisha. Schedule 9 will commence on the first 1 January, 1 April, 1 July or 1
October after Royal Assent.
Background
Superannuation integrity measures
The Superannuation Guarantee (SG)
The SG is the amount that employers are required to
contribute to the superannuation accounts of their employees.[2]
It is currently set at 9.5 per cent of the employee’s ordinary time earnings
(OTE) and is scheduled to progressively increase to 12 per cent by 2025-26.[3]
SG amounts are payable to employees that earn more than $450 in a calendar
month.[4]
An employer is required to make payments of SG amounts to their employee’s
superannuation fund at least quarterly.
Like salary and wages expenses, SG amounts paid by an
employer are generally deductible expenses for income tax purposes.[5]
The Superannuation Guarantee Charge (SGC)
If an employer has failed to pay their SG liability for the
quarter on time then the employer may have to lodge a Superannuation Guarantee
Charge (SGC) statement, or following an audit, the ATO may raise an estimated
SGC liability against that employer. The SGC amount is made up of:
- the
SG shortfall amount for the quarter, which is transferred by the ATO to the
employee’s superannuation account
- interest
on the shortfall amount, currently charged at 10 per cent per annum, also paid
to the employee’s superannuation account and
- an
administration fee of $20 (per employee, per quarter) paid to the ATO.[6]
Unlike SG amounts, SGC amounts are not
deductible expenses for income tax purposes.[7]
In addition, penalties may apply to
employers who do not meet their SG obligations. These penalties include:
- the
general interest charge, currently 8.96 per cent per annum, which is imposed if
the SGC is not paid by the due date[8]
and
- administrative
penalties under Part 7 of the Superannuation Guarantee
Administration Act, of up to double the amount of SGC, including
for failing to keep records and failing to lodge a SGC statement.[9]
Director penalties
A director of a company that fails to meet its pay as you
go (PAYG) withholding tax obligations or to pay its SGC liabilities may also be
held directly liable for director penalties equal to the unpaid tax or SGC
amount. Personal liability for SGC amounts was introduced by the Tax Laws Amendment
(2012 Measures No. 2) Act 2012.
Before pursuing a director penalty the ATO must issue the
director with a Director Penalty Notice (DPN) outlining the unpaid amounts and
options for remitting their liability.[10]
The Commissioner may issue a DPN for an unpaid PAYG withholding or SGC amount
based on:
- an
assessment (based on the company’s PAYG or SG reporting), or
- an
estimate by the ATO of the amount of unpaid PAYG withholding or SGC.
Remission of director penalties
Generally, a director of a company is not obliged to pay a
director penalty if:
- the
company pays the outstanding amount or
- an
administrator is appointed or
- the
company commences being wound up.[11]
However, if three months have passed since the due date and
the company has not reported the unpaid SGC or PAYG withholding amount to the
ATO then the penalty becomes ‘locked down’ and can only be remitted if the
amount of the underlying liability, or the director penalty is paid.[12]
If the PAYG withholding or SGC amount is based on an estimate rather than a
reported amount, then the director penalty becomes locked down after three
months following the due date for payment of the underlying liability to which
the estimate relates.[13]
The Explanatory Memorandum to the Bill notes that
companies have been able to avoid director penalties by liquidating the company
or placing it into administration before the penalty is locked down.[14]
The size and impact of unpaid SG in Australia
There has been considerable work in recent years to examine
the size of unpaid SG amounts and the impact that this has had on Australian’s
retirement savings.
- On
1 December 2016 the Senate referred an inquiry into the impact of unpaid SG
amounts to the Senate Economics References Committee (the References Committee).
- Also
in December 2016 a Superannuation Guarantee Cross-agency working group (the SG
working group) was established to examine the operation, administration and
extent of non-compliance in the Superannuation Guarantee system. The SG Working
group comprised representatives from the ATO, the Treasury, the Department of
Employment, the Australian Securities and Investments Commission and the
Australian Prudential Regulation Authority.[15]
References committee report
The References Committee’s final report was released on 2
May 2017. The Final Report noted that the non-payment of SG has considerable
impacts on both individual’s savings and Government finances:
Evidence received by the committee clearly indicates that a
failure to adequately detect and address SG non-compliance causes long-term
financial detriment to millions of Australian employees, significant
competitive disadvantage to compliant employers, and an unnecessary impost to
government finances through additional reliance on the age pension.[16]
However, the References Committee noted difficulties in obtaining
a reliable estimate of the under and non-payment of SG (the ‘SG Gap’):
During the course of this inquiry it became apparent to the
committee that due to various data gaps, it is difficult to precisely estimate
the extent of non-payment of SG in Australia.[17]
The References Committee was critical of the ATO’s
reluctance to provide an estimate of the SG Gap, and recommended that the ATO
prepare an estimate as a matter of priority.[18]
In August 2017, the ATO estimated that in 2014‑15 was
$2.85 billion, representing 5.2 per cent of the total SG payments that employers
were required to make.[19]
The ATO also stated that around half of the SG gap relates to business insolvency.[20]
SG working group
The final report of the SG Working Group was provided to the
Minister for Revenue and Financial Services, Kelly O’Dwyer on 31 March 2017 and
publicly released on 14 July 2017.[21]
According to the final report, between 2011-12 and 2015-16
the ATO raised around $5.3 billion in SGC debts, of which just over 50 per
cent were from insolvent businesses.[22]
The ATO estimated that around $113.2 million of SGC debt was irrecoverable at
law from insolvent businesses in 2015‑16.[23]
In 2014-15, the year for which the ATO has estimated the SG
Gap, the ATO raised $1,144.37 million in SGC debts of which $521.39 million was
collectable.[24]
Table 1: trends in SGC debt
| SGC |
2011-12 |
2012-13 |
2013-14 |
2014-15 |
2015-16 |
|
$m |
Cases |
$m |
Cases |
$m |
Cases |
$m |
Cases |
$m |
Cases |
| Collectable |
340.14 |
11,231 |
403.35 |
12,879 |
461.59 |
17,389 |
521.39 |
25,281 |
622.62 |
25,665 |
| Disputed |
45.17 |
358 |
71.44 |
483 |
35.98 |
380 |
24.57 |
212 |
28.33 |
247 |
| Insolvent |
454.27 |
6,089 |
461.17 |
5,561 |
517.57 |
5,774 |
598.41 |
6,541 |
718.34 |
7,977 |
| Total |
839.58 |
17,678 |
935.96 |
18,923 |
1,015.14 |
23,543 |
1,144.37 |
32,034 |
1,369.29 |
33,889 |
Source: Superannuation Guarantee Cross–Agency Working
Group, Final
report, p. 34.
The industries where SGC debts are highest include the
construction industry, accommodation and food services, manufacturing and
administrative and support services.[25]
Recommendations of the SG working
group
The Final Report of the SG Working Group included nine
recommendations to address the issue of SG non-compliance.[26]
On 28 March 2018 the Government committed to adopting five of these
recommendations which are addressed by this Bill.[27]
Aligning penalties with employer
culpability
The SG Working Group report argued that the current
penalty regime for SG non-compliance is inflexible and recommended better
aligning penalties with employer culpability (recommendation six).[28]
The changes in Schedule 1 are intended to align with this recommendation by
providing the Commissioner with powers to pursue stronger penalties for serious
contraventions of employer SG obligations.[29]
The amendments proposed in Schedule 1 would provide the
Commissioner with the power to direct an employer to pay any outstanding SGC
amounts or any related SGC penalties. Further, it would also allow the ATO to
seek court-ordered penalties in the event that an employer fails to comply with
a direction given by the Commissioner within a specified time. The penalties
may include monetary penalties and/or imprisonment for up to 12 months in
serious cases.
The proposed directions power would require the
Commissioner to consider, among other things, the employer’s history of
compliance and the size of the unpaid liability.[30]
It is intended that the Commissioner would only issue directions:
in relation to serious contraventions of the obligations to
pay superannuation guarantee related liabilities by employers whose actions are
consistent with an ongoing and intentional disregard of those obligations.[31]
ATO to inform employees of under-payment
or non-payment of SG
The SG Working Group recommended that the ATO should be
able to advise employees (or ex-employees) that it has detected potential
non-payment of SG entitlements by their employer (or former employer) and to
disclose information on any compliance or recovery actions the ATO is or has
taken (recommendation three).[32]
This recommendation is implemented in Schedule 2 to the Bill.[33]
Expansion of single touch payroll
reporting
Single touch payroll (STP) reporting, which commenced on 1
July 2018 for employers with 20 or more employees, requires employers to report
payroll and superannuation information to the ATO at each pay cycle through STP
capable accounting and payroll software.[34]
The SG Working Group report states that:
[Single touch payroll] has the potential to significantly
improve the visibility of superannuation guarantee obligations. It brings with
it the potential for substantially improved data analysis to identify patterns
of non-compliance and continue to reduce red tape for employers and build on
natural business processes.[35]
The SG working group recommended that STP reporting be
extended to all businesses regardless of the number of employees
(recommendation one).[36]
The proposed changes in Schedule 3 of the Bill would extend STP reporting to
all employers from 1 July 2019.
More frequent reporting of
superannuation fund information
Superannuation fund providers are required to provide
certain information about their members’ accounts to the ATO through member
information statements, including contribution amounts, account balances and
transfers.
The SG working group recommended that superannuation funds
report more frequently (recommendation two).[37]
Following this recommendation, the ATO is increasing the frequency in which
superannuation funds need to provide member information statements from annual
reporting to ‘events based’ reporting.[38]
A key requirement of ‘events based’ reporting is that superannuation funds are
required to report all superannuation contributions to the ATO when they are
received.[39]
The changes in Schedule 4 make several amendments which
are related to these reporting changes, including:
- allowing
the Commissioner to provide a grace period to superannuation providers to
correct false or misleading information in relation to member information
statements without applying penalties
- removing
the requirement for employers to report employee contributions, as they will
now be provided more regularly from superannuation funds themselves and
- removing
a requirement for superannuation funds to lodge bi-annual statements for lost
members.[40]
Enhancements to the Director
Penalty Notice Regime
The SG Working Group recommended that enhancements should
be made to the DPN regime to improve SG compliance and collection of SGC debts
(recommendation four).[41]
The SG working group identified a number of limitations of the DPN regime,
including that directors can avoid personal liability by liquidating the
company before the penalty is locked down.[42]
The SG Working group recommended that director penalties
be locked down as soon as they are incurred in order to prevent this behaviour.
This would reduce the amount of SGC that is irrecoverable due to corporate
insolvency.[43]
The proposed amendments in Schedule 5 of the Bill seek to implement this
recommendation.
The SG Working Group also recommended changes to improve
the recovery of SGC debts by enhancing the Commissioner’s power to require a
security deposit to cover an unpaid tax liability (recommendation four).[44] The
Commissioner has the power under Division 255 of Schedule 1 of the TAA to
require an entity to provide security (by way of bond or deposit) to cover the
payment of an existing or future tax related liability where the Commissioner
has reason to believe that an entity will be carrying on a business for a
limited time only.[45]
The SG Working Group noted that compliance with security
deposit directions is low because the maximum penalty is often small compared
to the potential unpaid SGC amount that the ATO is seeking to secure.[46]
Currently the maximum penalty for failing to provide a security deposit is 100
penalty units.[47]
The changes proposed in Schedule 5 will provide the
Commissioner with the ability to seek a court order to compel an entity to
provide a security deposit.
Committee
consideration
Senate Economics Legislation
Committee
The Bill was referred to the Senate Economics Legislation
Committee (the Economics Committee) for inquiry and report by 13 June 2018.
Details of the inquiry are at the
Inquiry homepage. The Economics Committee final report recommended passage
of the Bill.[48]
The Australian Labor Party (ALP) senators on the Economics Committee indicated
their support for the Bill but stated in their additional comments that the
measures do not do enough to address the SG Gap:
Labor Senators note the general support for these schedules
but note that they will not close the entire superannuation guarantee (SG) gap.[49]
Senator Peter Whish-Wilson of the Australian Greens (the
Greens) also indicated support for the passage of the Bill but argued that the
minimum income threshold of $450 for the SG should be removed and SG payments
should be moved from the current quarterly timing to either monthly or in line
with regular pay cycles, whichever is more frequent.[50]
Senate Standing Committee for the
Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
(the Scrutiny Committee) considered the Bill in its Scrutiny Report of 9 May
2018.[51]
Most notably, the Scrutiny Committee raised concerns that the Bill creates a
number of new strict and absolute liability offences:
- proposed
subsection 265-95(1) of the TAA at item 1 of Schedule 1 of
the Bill creates a strict liability offence for failing to comply with a
direction of the Commissioner to pay an amount of SGC[52]
- proposed
section 255-120 of the TAA at item 1 of Schedule 5 of the
Bill creates a strict liability offence for failing to comply with a Federal
Court order to provide security under section 255-100 of the TAA[53]
- item
3 of Schedule 1 of the Bill amends section 8C of the TAA to make
failure to comply with an education direction under proposed section 384-15 an
absolute liability offence.[54]
These offences may result in a term of imprisonment of up
to 12 months. The Scrutiny Committee reiterated its long standing view that is inappropriate
to apply strict and absolute liability to offences if a period of imprisonment
may be imposed[55]
and noted that it is inconsistent with principles in the Guide to Framing
Commonwealth Offences, which states that application of strict or
absolute liability to all physical elements of an offence is generally only
considered appropriate in circumstances where the offence is not punishable by
imprisonment.[56]
The Scrutiny Committee sought further justification from the Minister for
creating both strict and absolute liability offences.[57]
Minister’s response
Minister O’Dwyer’s response published on 20 June 2017,
addressed these issues by further elaborating on the intent of the provisions
in question.[58]
In respect of proposed subsection 265-95(1) the Minister
stated that a strict liability offence is justified because directions to pay
the SGC will only apply to:
...a narrow subset of employers with serious contraventions of
their obligations to pay superannuation guarantee liabilities as required by
law and whose actions are consistent with an ongoing and intentional disregard
of those obligations.[59]
Further the potential penalty of up to 12 months
imprisonment would only apply to an employer that has continuously
failed to pay their superannuation guarantee liability.[60]
The Minister also stated that the penalty is specifically defined to provide a
strong deterrent to repeat offenders.[61]
In respect of proposed section 255-120 the
Minister’s response stated that the strict liability offence is appropriate because
a court order can only be issued to a person who has already committed an
offence by failing to comply with a Tax Commissioner’s direction to provide a
security deposit.[62]
The Minister also noted the intended deterrence effect of the strong penalty.[63]
In respect of the expansion of the absolute liability
offence at section 8C of the TAA to cover failure to comply with an education
direction under proposed section 384-15, the Minister’s response
states that a penalty of imprisonment can only be applied to third or
subsequent offences.[64]
Policy
position of non-government parties/independents
The ALP supports the Bill. In his second reading speech
the Shadow Assistant Treasurer, Dr Andrew Leigh, stated:
Labor supports the measures in this bill. They will go part
of the way towards addressing the significant problem of unpaid superannuation
in this country.[65]
Senator Whish-Wilson of the Greens indicated in his
additional comments to the Economics Committee report that the Greens support
the Bill, but sought additional amendments to SG legislation to remove the
minimum income threshold for payment of SG and require superannuation payments by
employers to be made more frequently.[66]
Position of
major interest groups
A number of stakeholders made submissions to the Economics
Committee’s inquiry into the Bill. These submissions are summarised on pages 19
to 33 of the Economic Committee’s final report.[67]
Generally stakeholders were supportive of the measures in the Bill, however,
some employer representatives considered that the penalties in the Bill are too
harsh.
The National Retailers’ Association (NRA), for example,
argues that some of the penalties (particularly imprisonment) in the Bill are
excessive and their application constitutes an inappropriate reversal of the
burden of proof:
NRA has concerns that the creation of additional avenues by
which penalties may be imposed on employers is excessive and, in the terms
contemplated, contrary to sound legislative and legal principles.[68]
...
It is irrelevant to a prosecution under section 265-95 [the
proposed directions power] if a person is in fact innocent at law from any
liability to pay the amount to which the direction relates, but for the
direction itself. As such, the offence created in subsection 265-95(1) offends
the presumption of innocence.[69]
Financial
implications
Schedules 1 to 6 of the Bill which implement the proposed
SG integrity measures are expected to reduce the fiscal balance by $0.5 million
over the 2018-19 Budget forward estimates period.[70]
Schedules 7 and 8 are expected to have nil financial
impact.[71]
Schedule 9 is expected to reduce the fiscal balance by
$1.1 million over the Budget forward estimates period.[72]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[73]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee on Human Rights (the
PJCHR) considered the Bill in its Scrutiny Report of 8 May 2018. The PJCHR
raised similar concerns as the Scrutiny Committee about the suitability of
strict and absolute liability offences created by the Bill, arguing that they
engage and limit the presumption of innocence.[74]
After considering the Minister’s response to its concerns, the Committee considered
that the offences were likely to be compatible with the presumption of
innocence.[75]
Key issues
and provisions
Schedule 1 – Direction powers
Part 1 – Direction to pay
superannuation guarantee charge
Item 1 inserts proposed Subdivision 265-C to Schedule
1 to the TAA which:
- introduces
a new power for the Commissioner to give a direction to an employer to pay an
amount of SGC and
- introduces
penalties for failing to comply with such a direction within the required
timeframe.
Directions
Proposed subsection 265-90 introduces the new
directions power. The directions power allows the Commissioner to give a
written direction to an employer to pay an amount of SGC for a particular
quarter.
In deciding whether to give a direction the Commissioner
must have regard to the matters at proposed subsection 265-90(2), namely:
- the
employer’s history of compliance with the requirement to pay the SGC and
compliance with any other tax laws
- whether
the amount of unpaid SGC is substantial having regard to the size and nature of
the business
- any
steps the employer has made to pay the unpaid SG amount and
- any
other matter the Commissioner considers relevant.
Although not explicit in the provisions of the Bill, the Explanatory
Memorandum to the Bill states that the reason that the Commissioner must have
regard to these matters is:
It is intended that the Commissioner only issue directions in
relation to serious contraventions [emphasis added] of the obligations
to pay superannuation guarantee related liabilities by employers whose actions
are consistent with an ongoing and intentional disregard of those obligations.[76]
The direction must include certain information, including
the amount of SGC to be paid and the due date for the payment. The direction
must give the employer at least 21 days to pay the SGC liability (proposed
subsection 265-90(3)), however the Commissioner may specify a longer timeframe.[77]
Proposed section 265-100 provides that the
Commissioner may vary or revoke a direction. The Commissioner may vary a
direction by reducing the amount that the employer is required to pay or by
extending the period for payment. The direction may only be varied in a way
that is beneficial to the employer.[78]
A decision by the Commissioner to vary or revoke a decision does not affect the
employer’s SGC liability (subsection 265-100(2)).
Offence and Penalties
Proposed section 265-95 creates a new offence for not
complying with a Commissioner’s direction to pay a SGC amount before the
specified due date. The maximum penalty for the offence is 50 penalty
units ($10,500) or 12 month imprisonment, or both.
The offence is an offence of strict liability (proposed
subsection 265-95(2)). This means that fault does not need to be
established, it is sufficient that the employer failed to pay the outstanding
amount within the timeframe required by the direction.[79]
An offence is not committed if the employer can
demonstrate that they took all reasonable steps to comply with the direction
and to discharge the liability before the direction was given (proposed
subsection 265-95(3)).
The Explanatory Memorandum to the Bill explains that the
purpose of this defence is to ensure that employers are not subject to criminal
charges if they are genuinely unable to meet their SG liabilities. The employer
has the evidential burden of proof to show that this defence is available to
them.[80]
Objections
Proposed section 265-110 allows the employer to lodge
an objection to the Commissioner’s decision to give a direction. Objections are
dealt with under Part IVC of the TAA. The objection must be made within
the time period specified by the direction.
Proposed section 265-115 provides that if an
objection is made, the period for complying with the direction is automatically
extended. In effect the determination period is frozen for the time that it
takes for the objection to be considered.[81]
So for example, if the direction period was 21 days and the employer lodged an
objection on day 10, the period would be frozen while the matter was being
considered and the employer would still have 11 days to comply with the
direction in the event the objection was denied.
Part 2 – Education directions
Item 4 inserts proposed Division 384 into Schedule
1 to the TAA, which introduces a new power for the Commissioner to
direct an employer who has failed to comply with their SG obligations to
undertake a specified course of education.
Directions
Proposed section 384-10 details the circumstances
under which the Commissioner can issue an education direction in relation to a
SGC liability. These include:
- failure
to pay an amount of SG-related liability
- failure
to comply with an obligation to give a statement or information to the
Commissioner under the Superannuation
Guarantee (Administration) Act 1992 (SGAA)
- failure
to keep necessary records under the SGAA and
- failure
to comply with an obligation under the TAA that relates to the SGAA.
Proposed section 384-15 states that Commissioner
can give an education direction to an employer that requires the employer (if
they are an individual) or any individual who makes decisions that affect the
whole or a substantial part of the employer’s business to undertake a specified
approved course of education.
It is generally expected that an education direction would
be issued to an employer where a lack of knowledge of their SG obligations has
contributed to their failure to comply with those obligations.[82]
The Commissioner can revoke or vary a direction on their
own initiative (proposed section 384-30) or following the written
request of the employer. If the Commissioner does not make a determination on
the request within 28 days the request will be taken to have been refused (proposed
section 384-35).
Offence and Penalties
Section 8C of the TAA provides that non-compliance
with specified obligations and provisions of the taxation law is an absolute
liability offence.[83]
Item 3 of Schedule 1 amends section 8C to add a failure to comply with
an education direction in accordance with proposed subsection 384-15(3)
to the list of specified provisions. This means that failure to comply with an
education direction will be an absolute liability offence. The maximum penalty
for a first offence under section 8C is 20 penalty units ($4,200). The
penalties increase for second and subsequent offences. For a second offence a
monetary penalty of up to 40 penalty units ($8,400) applies, for third or
subsequent offence the penalty can be up to 50 penalty units ($10,500) or up to
12 months imprisonment.[84]
Course of education
Proposed section 384-20 provides that the Commissioner
can approve one or more courses for the purposes of complying with an education
direction. An entity providing an education course can charge fees for the
course but not so much as to amount to taxation (that is, the fees should
reflect the costs of providing the course) (proposed section 384-25).
Objections
Proposed section 384-40 allows the employer to lodge
an objection under Part IVC of the TAA to the Commissioner’s decision to
give an education direction. The objection must be made within the time period
specified by the direction.
Schedule 2 – Disclosure of
information about non-compliance
Section 355-25 of Schedule 1 of the TAA
makes it an offence for an officer of the ATO to make a record of protected
information or to disclose protected information to another entity, except in
certain prescribed circumstances. One set of prescribed circumstances, set out
at section 355-65, deals with disclosures for other government purposes.
Schedule 2 of the Bill amends the TAA to permit an
officer of the ATO to disclose certain information to an employee where it
relates to a failure, or suspected failure, of their employer to pay their
superannuation guarantee entitlement.
Item 2 amends the prescribed circumstances at
subsection 355-65(3) of Schedule 1 of the TAA to allow protected
information that relates to the following matters to be disclosed to an
employee:
- the
failure or suspected failure of their employer or former employer to comply
with their superannuation guarantee obligations in relation to the employee
- any
actions that the Commissioner has taken in relation to such a failure or
suspected failure.
This does not
include information about the general financial affairs of the employer.
The amendments are intended to supplement the existing law
that allows the Commissioner to disclose certain protected information if it is
the employee who initiates the complaint to the Commissioner about their
employer’s failure to comply with their SG obligations (rather than the ATO).[85]
Schedule 3 –Single touch payroll
reporting
Part 1 of Schedule 3 extends single touch payroll (STP)
reporting to all employers, including those with 19 or fewer employees. Currently
under subsection 389-5(1) of Schedule 1 to the TAA only ‘substantial
employers’ are required to report through STP.
‘Substantial employer’ is defined at subsection 389-5(6)
of Schedule 1 to the TAA as an employer that had 20 or more employees as
at 1 April 2018 or an employer that is part of a wholly owned group that had 20
or more employees as at 1 April 2018.
Item 6 amends subsection 389-5(1) of Schedule 1 to the
TAA to remove the reference to substantial employers, so that STP
applies to all employers regardless of how many employees they have.
Item 7 repeals the definition of substantial
employer at subsection 389-5(6).
The Explanatory Memorandum states that the reason for
expanding STP to all employers is to:
improve the Commissioner’s ability to monitor superannuation
guarantee compliance by increasing the visibility of non-payments by all
employers.[86]
Item 10 provides that employers with 20 or more
employees still need to comply with STP from 1 July 2018 (as
currently provided) and employers with fewer employees will need to comply from
1 July 2019.
Part 2 of Schedule 3 further extends STP by
requiring that in addition to reporting salary, wage and ordinary time earnings
amounts to the ATO, employers must also report information on employee payments
that have been salary-sacrificed into a superannuation account.
This is intended to complement the measures contained in
the Treasury
Laws Amendment (Improving Accountability and Member Outcomes in Superannuation
Measures No. 2) Bill 2017 to provide that amounts salary sacrificed into a
superannuation fund cannot be counted towards an employer’s mandatory SG
contributions.[87]
The amounts that are required to be reported to the
Commissioner are specified at the table in subsection 389-5(1) of Schedule 1 to
the TAA. Item 14 repeals the existing requirement to report the
salary, wages and ordinary time earnings of an employee and replaces it with a
requirement to report an employee’s:
- ordinary
time earnings
- salary
and wages and
- an
amount that would have been paid to the employee as either ordinary time
earnings or salary and wages had it not been salary sacrificed into
superannuation.
Item 16 provides that the requirement to report
salary sacrificed amounts commences from the quarter after Part 2 of Schedule 3
commences.
Schedule 4 – Fund Reporting
Part 1 – Grace periods for
superannuation funds
Part 1 of Schedule 4 amends the TAA to allow
the Commissioner to provide a grace period to superannuation fund providers to
correct false or misleading statements in relation to member information
statements.
Various penalty provisions currently exist in the TAA
for making false or misleading statements including:
- Subsection
8K(1) of the TAA makes it an offence to make false or
misleading statements to an officer of the ATO. Subsection 8K(1B) of the TAA
makes it offence to make a statement that is misleading because of a
material omission.
- The
potential penalty for an offence under subsections 8K(1) and (1B) is a fine of
up to 20 penalty units ($4,200) for a first offence and up to 40 penalty units
($8,400) if the offender has previously been convicted of another relevant
offence.[88]
- Subsection
8N(1) of the TAA makes it an offence to make a false or misleading
statement due to recklessness.
- The
potential penalty for an offence under subsection 8N(1) is a fine of up to 30
penalty units ($6,300) for a first offence and up to 50 penalty units ($10,500)
or imprisonment for up to 12 months (or both) if the offender has previously
been convicted of another relevant offence.[89]
- Subsection
284-75(1) of Schedule 1 to the TAA applies an administrative penalty if an
entity makes a false or misleading statement (including by omission) to the
Commissioner or to another entity that is exercising power or performing
functions under a taxation law . Various penalties are provided depending on
whether the statement resulted in a shortfall in the amount of tax payable.
Penalties range from 20 penalty units to 75 per cent of the shortfall amount.[90]
Item 5 inserts section 390-7 into Schedule 1 to the
TAA which allows the Commissioner to provide a grace period in
which a superannuation fund can correct a misleading statement and not be
subject to one of the penalties outlined above. The Commissioner may determine
the length of the grace period that applies to a particular superannuation
provider or, by legislative instrument, the length of a grace period that
applies to a class of superannuation providers.
Part 2 – employer reporting of
superannuation contributions
Part 2 of Schedule 4 amends the TAA to
remove the requirement for employers to report member contributions. Under
events based reporting superannuation funds are now required to disclose superannuation
fund contributions.
Part 3 – Statements for lost
members
Part 3 of Schedule 4 amends the SUMLMA to
remove the requirement for superannuation funds to report twice annually on
lost superannuation of members to the ATO for the purposes of the Commissioner
maintaining a register of lost members. Instead the Commissioner will be able
to request such information using their power under 390-5 of Schedule 1 of the TAA.[91]
The changes do not apply in relation to information that superannuation funds
were required to provide from any six month period prior to 1 January 2018 (item
16).
Schedule 5 – Compliance Measures
Schedule 5 of the Bill makes proposed amendments to
penalties that apply to Directors who fail to meet their SG obligations and
provides for the Commissioner to seek a court order requiring an employer to
provide a security deposit over an unpaid tax or superannuation liability.
Part 1 – Penalties relating to
estimates
Division 268 of Schedule 1 of the TAA provides that
the Commissioner can make an estimate of unpaid PAYG withholding amounts or
unpaid SGC amounts. The company to which the estimate relates is under an
obligation to pay the estimated liability from the date that the estimate is
issued. This may be long after the underlying SGC or PAYG withholding amount was
due.
Division 269 imposes an obligation on directors to either
ensure that the company pays amounts due for the SGC or unpaid PAYG withholding
amounts, or for estimates of these amounts under Division 268, or goes
promptly into voluntary administration or liquidation. A failure by a director
to comply with this duty is punishable by a penalty.
However, under section 269-10 the time at which the
director’s obligation to ensure the company pays the unpaid SGC or PAYG
withholding amounts arises differs from the time at which the director’s
obligation to ensure the company pays the Division 268 estimate arises. The
timing difference can be exploited by company directors to avoid paying the
liability.
Item 3 of Part 1 of Schedule 5 amends section
269-10 to change the date at which a director commences being under an obligation
to ensure that the company complies with its obligations in respect of an
estimate under Division 268 (the ‘initial day’) to back date it to the day that
the underlying SGC or PAYG amount was due, this is regardless of when the Commissioner
issues the estimate of the unpaid amount.
Proposed subparagraph 269-10 (5)(b) amends the
initial day for an estimated SGC amount. The initial day is the end of the
quarter to which the SGC liability relates.
Proposed subparagraph 269-10(5)(a) amends the
initial day for an estimated unpaid PAYG withholding liability to reflect the
due date for remitting PAYG withholding amounts to the ATO. The due date for
PAYG withholding amounts varies based on whether the company is a large, medium
or small withholder as defined by subsections 16-95, 16-100 and 16-105 of the TAA
respectively. Typically smaller withholders have longer to remit PAYG
withholding amounts to the ATO.
Item 4 inserts proposed subparagraph 269-15(2A)(a)
to make certain that a liability to pay a director penalty which is based on an
estimate applies even if the underlying liability never existed or has been
discharged in full. Proposed subparagraph 269-15(2A)(b) makes certain
that a director penalty applies even if it is larger than the underlying
liability.
Part 2 – Director Penalties
A director of a company will stop being under the
obligation under Division 269 if the company pays the relevant due amount, an
administrator is appointed or the company is wound up.[92]
Subsection 269-30(1) provides that a director penalty under Division 269 is remitted
if a director stops being under a relevant obligation either before the
director penalty notice is given to them, or within 21 days of being given the notice.
However, the table at subsection 269-30(2) outlines the circumstances in which
appointing an administrator or winding up a company will not result in
remission of a director penalty. Currently director penalties relating to
unpaid PAYG withholding amounts or SGC amounts are not eligible to be remitted
if three months has passed since the due date for those amounts.
The changes proposed at Part 2 of Schedule 5 of the Bill
remove the current three month period before a director penalty is ‘locked down’,
removing the ability for a director penalty to be remitted by putting the
company into voluntary administration or insolvency in this period.
The current due date for SGC amounts is one month and
28 days after the end of the quarter to which the underlying SG amount relates.
The three month period applies in addition to this, providing a total period of
four months and 28 days in which the director penalty amount is not locked
down.[93]
The changes in Schedule 2 remove this three month period
for unpaid SGC amounts and estimated unpaid SG amounts, so that director penalties
are locked down on the day that the unpaid SGC amount is due (one month and 28
days after the end of the quarter). The three month period would still apply to
unpaid or estimated unpaid PAYG withholding amounts.
Transitional provisions
Subitem 13(a) provides that the changes only apply
to SGC amounts that first become payable on or after 1 July 2018. Subitem
13(b) provides that the changes only apply to estimated SGC amounts where
the estimate was made after 1 July 2018 regardless of when the underlying SG
liability arose.
Part 3 – Orders to provide security
Currently, the Commissioner can require an enterprise to
provide security in respect of an existing or future tax liability if the
Commissioner believes that the entity will be carrying on a business in
Australia for a limited period of time.[94]
Security may be provided by way of a bond, deposit or any other means the
Commissioner considers appropriate.[95]
It is offence to fail to comply with a direction to provide security, subject
to a penalty of 100 penalty units.[96]
The changes proposed at Part 3 of Schedule 5 would allow
the Commissioner to apply to the Federal Court to order a company to provide
security in support of an unpaid tax liability.
Item 14 adds proposed subsection 255-115(1) to
Schedule 1 of the TAA to provide that the Federal Court may order an
individual to provide security.
Item 14 also adds proposed section 255-120 which
makes it an offence to fail to comply with a court order to provide security.
The offence would be subject to a maximum penalty of 50 penalty units, 12
months’ imprisonment or both.
Schedule 6 – Amendments relating to
employee commencement
Schedule 6 contains amendments to provide for the pre-filling
of an employee’s tax file number (TFN), withholding and superannuation fund
choice information when an individual commences with a new employer.
Item 1 amends section 202CG of the ITAA36 to
allow a taxation officer to disclose TFN information to an employer if the
employee made a TFN declaration in relation to that employer.
Item 2 provides that the amendment applies to a TFN
declaration made on or after 1 July 2018.
Item 3 amends subsection 355-50(2) of the TAA
to allow a taxation officer to provide certain protected information to an
employer for the purposes of arranging income tax withholding for an employee.
Item 4 amends subsection 355-65(3) of the TAA
to allow a taxation officer to provide information to an employer for the
purposes of assisting an employee to choose whether to maintain their existing
superannuation fund or create a new superannuation account.