Tuesday, 1 December 2015
Treasury Legislation Amendment (Repeal Day 2015) Bill 2015; Second Reading
I thank the member for Rankin for his contribution and I will say to the member for Rankin before he leaves the chamber that I fully agree with him that Australian business owners should pay the superannuation obligations to their employees on time. I do not think there is a single person in this House who would disagree with that notion. Yet, in respect of this bill, we see a situation where if an employer misses a payment by one day or a couple of days, under the existing rules they get hit with penalties. The purpose of this bill is to recognise the fact that the vast majority of employers do the right thing, but occasionally they may be a day or two late. They are still going to pay some penalties, but not the penalties will not be as punitive as they were. I think that is fair enough that they are penalised for being late, but it is not fair to backdate interest to the start of the quarter. If the payment was only due at the end of the quarter, then the interest payment should be for the period between when the payment was due and when it was actually paid, and not backdated to a date prior to when it was actually due to be paid.
I fully support this bill in the original form in which it was brought to this House and consequently do not support the member for Rankin's amendments. It is interesting to reflect that it has been more than 20 years since the superannuation guarantee was introduced and, as I have already touched upon, the majority of employers comply with their superannuation guarantee obligations. I know from my role as the chair of the Tax and Revenue committee one frequent topic of discussion with the Australian Taxation Office is how to continue to work with both the ATO and businesses to ensure that business is complying with their SG obligations. However, excessive and unnecessary regulation does reduced productivity and investment. It suppresses job creation, creates economic uncertainty and has a negative impact on consumer and investor confidence. This legislation in no way reduces the requirement for employers to pay their SG superannuation obligations on time.
I am proud to say that I am part of a government that has worked very hard over the past two years to reduce the red tape and regulation in our economy, and we have achieved some $2.5 billion worth of regulatory savings in those two years. This bill forms part of the government's commitment to repeal counterproductive, unnecessary and redundant legislation through the four schedules in the bill. The focus of the debate has been the changes to the superannuation guarantee charge. The superannuation guarantee charge was first introduced in 1992. It was quite a punitive measure designed to encourage employers to comply with their new SG obligations. The charge, imposed on employers who do not comply with their SG obligations, seeks to recoup the outstanding SG for employees with nominal interest to compensate employees for lost earnings. Administrative charges also apply and the Australian Taxation Office can levy penalties of up to 200 per cent of the SG charge for noncompliance.
In particular, the nominal interest was designed to be punitive. Nominal interest is calculated from the beginning of the quarter—instead of 29 days from the end of the quarter, which is when SG becomes outstanding —until an assessment is raised by the ATO. This means around four months of nominal interest was imposed for noncompliance with SG obligations. The SG charge is also calculated on a different and broader earning base than the SG, which adds another complexity for employers. I am sure we have all had in our office small business people complaining about SG charges of one form or other. Many deserved to be charged that SG charge, and I would not support their efforts to reduce it. But there was the odd one who missed a date. The current superannuation guarantee charge regime can be very punitive for employers who inadvertently pay their SG contributions late or short-pay by a small amount, and this can ultimately have a significant impact on the small business.
Key superannuation and industry bodies were consulted during this process and stakeholders generally supported reforming the SG charge to reduce the complexity of the regime and make the charge more proportionate to the noncompliance. As a result of this extensive consultation—there was often no consultation whatsoever when those opposite were in government—the government is making changes to the SG charge to make it more proportionate. The government is committed to employees receiving their superannuation so that Australians can save for their retirement. However, it is important to right-size the regulatory environment where appropriate.
Changes to the SG charge will include: aligning the earnings base for calculating the SG charge with the earnings base for calculating SG contributions—aligning them will reduce costs and confusion for employers; making the SG charge more proportionate to the noncompliance by aligning the interest component of any SG shortfall with the period contributions are outstanding—this is fairer and less complex for business; and removing the additional penalties under the Superannuation Guarantee Administration Act 1992 and aligning them with the administrative penalties under the Taxation Administration Act. This change will simplify penalties under the superannuation guarantee charge regime by having penalty rules which are consistent with those applied to other tax obligations.
These changes balance simplifying the SG charge and making the penalty more proportionate to the noncompliance while retaining significant penalties to encourage employers to comply with the superannuation guarantee regime. Administrative penalties of up to 75 per cent of the SG charge as well as administrative charges will apply to encourage employers to comply with the SG charge regime. Also, the SG charge remains non-deductible, which is considered a significant penalty by employers. While these changes will simplify the SG charge and make the penalty more commensurate with the breach, overall they will provide adequate incentives for employers to comply with their SG obligations in the future.
This bill is focused on achieving our commitment to the Australian people of reducing red tape and regulation because we recognise that it stifles job creation and economic growth. But let me make this abundantly clear to employers in this country: in no way whatsoever does this legislation give you a free pass that ameliorates your SG superannuation obligations. You are responsible for paying your SG superannuation obligations on time for your employees. That is your responsibility. I commend this bill to the House.