Thursday, 13 February 2020
Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019; Second Reading
I'll ignore the interjections from my friend on the right. In a very real sense, small business counts. The coalition government are backing small businesses to help them get ahead and create jobs. There are fundamentally two ways the coalition government support small business—firstly, indirectly, by creating a business framework or environment they can work and thrive in by having policy settings that reduce red tape and lower taxes, and workplace laws and supports for fairer competition; and, secondly, directly through government grants for start-up businesses and export grants, just to name two. The legislation before us today fits this by providing small business employers the opportunity to make good on their obligations to their employees, without beating them over the head with a stick and surrounding them in bureaucratic paperwork.
The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 is a superannuation guarantee amnesty which was first announced by the government in May 2018. The amnesty is designed to encourage employers who were not compliant in the past to come forward to ensure employees receive the superannuation they are entitled to. The reality is we rely on businesses to report their earnings, payroll and superannuation liabilities. With the introduction of Single Touch Payroll and real-time reporting, businesses now have more accurate information. Long gone are the days of abacuses and manual ledgers. This policy is forward-looking. We understand that this new system does not address historical underpayment of super. Reuniting as many workers as possible with that superannuation that is rightly theirs is therefore our priority. This is a once-off opportunity for businesses to come forward, do the right thing and wipe the slate clean.
This amnesty must be legislated as a matter of urgency. Since the introduction of the amnesty, over 7,000 employers have come forward. This means that the employees of these 7,000 employers will now receive what is rightfully theirs. Treasury estimates that a further 7,000 employers will come forward once the amnesty is legislated.
As those opposite might have you believe, this amnesty does not let employers off the hook and does not leave employees worse off. The amnesty is designed exclusively to benefit employees, a fact that I do not understand why those opposite will not accept. I repeat: the amnesty is exclusively designed to benefit employees. Employers will only get the benefit of the amnesty if they pay their employees superannuation entitlements in full with significant interest. This simply provides an opportunity for employers to review their compliance history, to come forward in good faith and to pay anything that is owed before the ATO begins using its new enforcement tools. Employers with historical superannuation underpayments who fail to voluntarily disclose those underpayments during the amnesty period and are found to be non-compliant by the ATO will be subjected to a minimum penalty equal to 100 per cent of the superannuation guarantee charge. This penalty and the underpayments are not tax deductible. Therefore, they are not getting away with anything. Furthermore, the ATO's cracking down harder on the underpayment of super. It has updated its practice guidance in relation to the remission of the additional super guarantee charge imposed under part 7 of the Superannuation Guarantee (Administration) Act 1992. Previously, the ATO chose a remission level at intervals that are much lower than the maximum penalty.
When the bill was first introduced, it was the community who called for a bigger stick for employers who did the wrong thing. This iteration of the amnesty achieves the correct balance of carrot and stick, the carrot being the amnesty and the stick being the higher minimum penalty and the higher default penalty. This bill complements the Superannuation Guarantee Integrity Package legislated last year. It provides employers with a chance to come clean and to pay their historical superannuation debts before new enforcement arrangements come into effect. Our reforms also improve the integrity of the superannuation guarantee system. We can now better detect and deter noncompliance by employers. This was the right thing to do.
This included the expansion of the Single Touch Payroll regime to all employers from July 2019, bringing payroll reporting into the 21st century. It has made it easier for employers to align payroll with their regular reporting of tax and super obligations and to minimise honest mistakes made by business owners. Single Touch Payroll works by sending tax and super information from the payroll or accounting software to the ATO as the payroll is run. It has streamlined the way we pay employees and also ensures that, when salary bands increase due to Fair Work Commission decisions, it is automatically reflected. If anyone has ever used an online payment system like Xero or MYOB, they will know how easy it is to click a button to generate the BAS. It is a game changer for small businesses.
The Morrison government has also taken strong action to protect Australians' compulsory superannuation, to ensure they are paid the superannuation they are due. These reforms not only benefit employers but, importantly, benefit and protect employees and, of course, their superannuation entitlements. More frequent reporting of employer superannuation guarantee obligations is being complemented by near-real-time reporting from superannuation funds on the contributions they actually receive. This enables the ATO to identify mistakes or noncompliance early and to take action to help small business rectify the situation as quickly as possible.
Unfortunately, there is no doubt that there can be those employers who seek to take shortcuts or short-change their staff. Therefore, the government has also introduced serious consequences for employers who do short-change their employees, by strengthening the ATO's collection and enforcement capabilities. The ATO has new enforcement and collection powers, including strengthened arrangements for director penalty notices and security deposits for superannuation and other tax related liabilities. In cases where employers defy a direction to pay their superannuation liabilities, the ATO can now apply for court ordered penalties, including up to 12 months imprisonment. The ATO also has the power now to require employers to undertake training on their obligations.
Recognising that at times employees are unaware that they have not been paid super, the ATO can now inform all potentially affected employees of any ongoing investigation into their employers' superannuation compliance. This will ensure employees remain updated as the investigation progresses. Previously, the ATO could only communicate with employees who had made a complaint to the ATO regarding their unpaid superannuation, leaving affected employees in the dark.
To ensure the ATO has the resources it needs to make sure employers are paying their fair share of tax and superannuation, the government provided the ATO with an additional $133.7 million in the 2018-19 budget. In financial year 2018-19, the ATO contacted more than 22,000 employers as a result of reviews or audits and recovered over $805 million in unpaid superannuation for employees.
The government's action to crack down on superannuation noncompliance complements reforms to protect low-balance and inactive superannuation accounts from undue erosion and puts members' interests first. The Protecting Your Superannuation legislation commenced on 1 July 2019. It protects the hard-earned superannuation savings of Australians from excessive fees, unnecessary insurance premiums and inefficiencies from holding multiple accounts. The reforms also, for the first time, provide the ATO with the ability to proactively reunite Australians with their low-balance and inactive accounts. Under the reforms, trustees are required to provide insurance only on an opt-in basis to members with inactive accounts unless the member has directed otherwise. This prevents the inappropriate erosion of retirement savings for cover that members do not know they have and which goes beyond what they need or which they cannot claim on.
The government has also introduced the Putting Members' Interests First bill, which is currently before the parliament. This legislation amends the Superannuation Industry (Supervision) Act 1993 as well as the Superannuation (Unclaimed Money and Lost Members) Act 1999. It ensures that members who are under 25 or who have balances under $6,000 are asked whether they wish to have insurance before premiums are automatically deducted from their accounts. As my colleague Senator the Honourable Jane Hume has said, if you are selling insurance that people don't need, don't want or don't understand, we will investigate; and, if we find evidence, we are likely to bring proceedings against you. And, as my colleague the Honourable Michael Sukkar MP said in the other place, given the significance of superannuation to Australians' retirement, government wants to ensure that people's hard-earned savings are not necessarily eroded by inappropriate insurance arrangements.
Superannuation is now the second-largest savings vehicle for Australian households and it accounts for 17 per cent of household assets. This particular reform will result in millions of Australians saving billions of dollars in fees and charges and insurance payments, and will reduce unnecessary duplicate accounts. Importantly, members will still be able to obtain or maintain insurance cover within their superannuation if they choose to do so. When the tax office data showed that 96 per cent of young people under 25 don't have dependents, it did make us wonder why they are automatically billed for death and disability insurance when they are signed up to super. Secondly, it seemed odd that, when a young worker joins their employer's super fund, they are likely to be automatically enrolled for insurance for death and disability, and possibly also income protection, without being asking for their permission. Thirdly, one in four people simply did not know that they were even covered in the first place. The fine print on insurance arrangements are complex.
We are serious about backing small business but not at the expense of everyday Australians' retirement savings. This bill provides the opportunity for small business to rectify honest mistakes and poor compliance for the benefit of their employees. As they are the employers of many everyday Australians, by supporting small business we are supporting workers. I commend the bill to the Senate.