CHAPTER 6
ALTERNATIVES TO THE PROPOSED COLLECTION MECHANISM
Alternative collection mechanisms
6.1 The Committee received many submissions in favour of alternatives
to the proposed collection mechanism (considered in Chapter 4). In particular,
the Committee received many submissions centred on the use of individuals'
group certificates as the surcharge collection mechanism. This was described
to the Committee as the 'oft-repeated alternative collection mechanism'.
[1]
6.2 The Business Council of Australia (BCA) recommended the following
alternative collection mechanism:
- the employer would provide superannuation contribution details via
group certificates;
- the employee would lodge his or her annual income tax return including
the contribution details indicated on the group certificate (lodged
with the return);
- the Australian Taxation Office (ATO) would levy surcharge, where applicable,
as part of the annual assessment; and
- the employee would meet the surcharge by the following alternatives:
- -offsetting the surcharge against any tax refund due; or
- -paying the surcharge directly; or
- -passing the liability to the superannuation fund to make the
payment by debiting his or her account. [2]
6.3 The Association of Superannuation Funds of Australia (ASFA) also
proposed an alternative collection mechanism in essentially the same terms
as those of the BCA. [3]
6.4 Coopers and Lybrand made a similar suggestion to that described above,
but instead of allowing the individual to choose how the surcharge is
paid, Coopers and Lybrand suggested that the ATO issue the surcharge assessment
to the individual's current superannuation fund, which would remit the
surcharge liability to the ATO. [4]
6.5 William M. Mercer Pty Ltd (Mercer) also supported employers advising
employees of the superannuation contributions paid on their behalf, but
stated, however:
This would not necessarily be on the employee's group certificate but
could be provided in some other form. The member would then submit these
details with his or her tax return. [5]
6.6 Mercer supported giving individuals the choice to pay surcharge liability
directly, or to pass it on to their current superannuation fund. [6]
6.7 Mercer also suggested that:
...the employer only report contribution details for members earning
more than a specified level, say $40,000 pa, meaning that well over
half the workforce would not be involved in the information collection
mechanism. [7]
6.8 The Committee notes that a number of other bodies also supported
the utilisation of group certificates for the surcharge collection mechanism,
including:
- the AMP Society; [8]
- the Australian Council of Trade Unions (ACTU); [9]
- the Australian Society of CPAs; [10]
- the Institute of Actuaries of Australia; [11]
- Jacques Martin; [12]
- the Life Insurance and Superannuation Association of Australia Inc
(LISA); [13] and
- the Metal Trades Industry Association of Australia (MTIA). [14]
6.9 The Committee was informed by proponents of group certificate collection
mechanism alternatives that such a mechanism would have a number of advantages
over the proposed collection mechanism, including:
- being more efficient;
- providing the Government with payments earlier; and
- being less intrusive to privacy.
6.10 It was also contended that the compliance costs for employers would
not be inappropriate.
6.11 Mrs Louise Matthews of Coopers and Lybrand argued the issue of efficiency
to the Committee as follows. She said that by collecting the surcharge
through the group certificate system would eliminate the need for the
ATO to match data:
The 15 million records that would need to be flowing from 140,000 funds
on those six million taxpayers would not need to be collected, collated
and matched with tax file numbers to the nine million tax returns. That
is eliminating what we think is a very cumbersome approach to the surcharge
legislation, especially from the point of view of administration for
the tax office. [15]
6.12 Mr Peter Foxton of ASFA compared the timing of payments under the
proposed collection mechanism with timing of payments utilising the group
certificate system, telling the Committee that:
The surcharge payments will not be made by a taxpayer's super fund
until a long time after a taxpayer's income tax assessment has issued.
For 1996-97 for instance, you have surcharge payment dates of mid-April
and mid-June in the following year. For future years, it is going to
be mid-September, mid-March the following year and then mid-June. The
majority of revenue collections will be at the later of these dates
and I suggest that the mid-June payment is where the bulk of the surcharge
is going to be collected.
If you compare that with the alternative process that is being put
up by the superannuation industry, under that system the surcharge could
be collected around the same time as the tax assessment is issued or
soon thereafter. The normal requirements for payment of the tax that
comes out of a tax assessment could apply to the payment of a surcharge,
either from a superannuation fund or from the individual, and that would
mean that the surcharge would be collected by the government months
earlier. [16]
6.13 Submissions to the Committee stated that an alternative collection
mechanism utilising group certificates would be less intrusive to privacy
than the proposed collection mechanism.
6.14 ASFA submitted that the alternative approach "avoids privacy
issues since the surcharge is worked out between the ATO and the taxpayer".
[17]
6.15 The Australian Society of CPAs submitted that an alternative collection
mechanism utilising group certificates would "encourage greater protection
of individual privacy". [18]
6.16 The Privacy Commissioner, Ms Moira Scollay, told the Committee that
options had been explored to reduce the surcharge's intrusion on privacy:
The range of options, I believe, has been considered, to try and reduce
the impact of the matching of 12 million cases for a return of 350,000
people actively involved in paying the surcharge. We would have preferred
a system that was less privacy intrusive, but my understanding is that
both the industry and the ATO have been agonising through options for
months and months and have been involving my office in those consultations,
and that no other feasible option has been able to be produced... [19]
6.17 It was contended that the compliance costs which an alternative
collection mechanism utilising group certificates would place on employers
would not be inappropriate. ASFA noted that:
Under new age based limits ... applying from 20 August 1996, currently
outlined in Tax Law Amendment Bill No 2 1997, employers using
accumulation funds are required to calculate superannuation contributions
for each employee in order to receive a tax deduction. Therefore, employers
already have superannuation details available for most of their employees
which could be easily transmitted on to the group certificate. [20]
6.18 The AMP Society submitted to the Committee that, given the amendment
described above:
...the employer must record and retain this [contribution] information
and the only additional cost required for the alternative proposal is
the cost associated with including the amount paid on the group certificate.
[21]
6.19 The AMP Society submitted that "this additional (and marginalised)
cost is more than outweighed by the cost savings achieved by not requiring
the superannuation funds to report". [22]
6.20 The Committee understands that if an alternative collection mechanism
utilising group certificates were to be used instead of the proposed collection
mechanism, then there would have to be careful consideration of the varying
ways of implementing such a general approach. Given the time constraints
of this report, the Committee considers it sufficient to note here that
a number of bodies stated that the surcharge could be collected by an
alternative collection mechanism utilising group certificates.
Government position
6.21 The question of alternative collection mechanisms was addressed
by the Hon. Chris Miles, MP, Parliamentary Secretary (Cabinet) to the
Prime Minister, in the Second Reading Speech to the Superannuation Contributions
Surcharge (Assessment and Collection) Bill 1997, as follows:
Alternative measures of collecting the surcharge have been put to the
government. The government has given careful consideration to those
suggestions. The alternatives suggested all involve an unacceptable
increase in compliance costs for employers, small business and all Australians.
A number of these alternatives involve transferring the reporting obligation
from superannuation funds to the significantly larger number of employers.
The government believes this would represent a substantial increase
in the compliance burden of small business.
Significantly, the administrative requirements on superannuation funds
under the government's approach are essentially similar to the processes
that superannuation funds already undertake as part of their normal
business operations. Against this background the government has decided
not to depart from the broad approach to collection of the surcharge
outlined on budget night. [23]
6.22 In evidence to the Committee, the ATO was asked questions in relation
to the Government's position on alternative collection mechanisms. In
the context of discussing the difficulties in collecting Tax File Numbers
(TFNs) from people from culturally and linguistically diverse backgrounds,
and from people living in remote areas, the Committee asked the ATO if
such problems could have been overcome by an alternative collection mechanism.
Mr Michael Monaghan of the ATO replied as follows:
I think our position there is that the government has announced the
way in which it wishes this policy to be implemented, and we are proceeding
to do that. [24]
6.23 Mr Monaghan was asked if alternative collection methods had been
examined, and if so, what difference in costs would apply if an alternative
collection method was used. He stated that other collection methods had
been examined, but that the role of the ATO was to implement government
policy and that the Government had confirmed the way in which it wished
the surcharge to be implemented. [25]
6.24 The Committee asked the ATO if it was prepared to make its assessment
of alternative collection mechanisms available to the Committee. Mr Monaghan
replied that the assessment is "subject of advice to the government",
but that the Committee's request could be passed on. [26]
At the time of writing this report the Committee had not received a response
to this matter from the ATO.
[GO TO CHAPTER 7]
Footnotes
[1] Submission 21, Australian Society
of Certified Practising Accountants (CPAs), p. 1.
[2] Submission 32, BCA, p. 3.
[3] Submission 23, ASFA, p. 11.
[4] Submission 30, Coopers and Lybrand,
p. 5.
[5] Submission 9, Mercer, p. 6.
[6] Submission 9, Mercer, p. 5.
[7] Submission 9, Mercer, p. 6.
[8] Submission 27, AMP Society, pp. 4-5.
[9] Submission 52, ACTU, pp. 2, 5.
[10] Submission 21, Australian Society
of CPAs, p. 1.
[11] Submission 39, Institute of Actuaries
of Australia, Attachment, pp. 7-8.
[12] Submission 10, Jacques Martin,
p. 3.
[13] Evidence, pp. 148-149.
[14] Evidence, p. 159; Submission
20, MTIA, Annexure A, p. 1.
[15] Evidence, p. 80.
[16] Evidence, p. 62.
[17] Submission 23, ASFA, p. 11.
[18] Submission 21, Australian Society
of CPAs, p. 1.
[19] Evidence, p. 130.
[20] Submission 23, ASFA, p. 12 (emphasis
in original).
[21] Submission 27, AMP Society, p.
5.
[22] Submission 27, AMP Society, p.
5.
[23] Hansard, House of Representatives,
13 February 1997, p. 626.
[24] Evidence, p. 296.
[25] Evidence, p. 297.
[26] Evidence, p. 298.
Top
|