The Australian Taxation Office (ATO) plays an important role as a guardian of Australia’s superannuation system. For more than 14 million Australian workers, the ATO ensures that employers make their mandatory contributions to superannuation.
While the overwhelming majority of employers do comply with their obligations, the ATO estimated -- in its 2022-23 superannuation guarantee compliance snapshot -- that the gap in superannuation compliance was 5.1% or $3.6 billion. This is a significant amount that employees are potentially missing out on.
To reduce this gap, the ATO uses a variety of compliance methods, from simple reminders to investigations of employee complaints and full-scale audits.
Following the introduction of Single Touch Payroll (STP) reporting, the ATO now has access to real-time salary payment data, and it matches this against contribution data provided by superannuation funds. This process allows the ATO to quickly identify instances where employers are not making their mandatory contributions and to take proactive actions, including sending reminders and prompts for employers to check their obligations.
When the required superannuation has not been contributed on time, the employer is required to lodge a superannuation guarantee charge (SGC) statement with the ATO and pay the SGC liability. In 2022-23, AUD 1.13 billion was raised via SGC liabilities.
Most of the funds raised through SGC liabilities – AUD 534 million -- came from 23,300 employees who made complaints of superannuation underpayments to the ATO, but to date the ATO has completed only 54% of its investigation into those cases. Clearly, employees now have a higher awareness of their superannuation entitlements and are prepared to use the ATO as their champion to recover underpayments.
The ATO also initiated 1,400 audits, which resulted in a further AUD 70 million of SGC liabilities raised. While the number is smaller than the number of employee complaints, it shows the ATO is active in keeping employers compliant, even if employees are unaware or ambivalent.
In the cases of ATO compliance actions, the SGC liabilities raised include additional penalties of AUD 157 million.
Ther ATO also raised AUD 445 million of SGC liabilities from cases where employers made a voluntary disclosure to the ATO. Importantly, in those cases the ATO has discretion to waive additional penalties. It appears the ATO has waived penalties in most voluntary disclosure cases.
Company directors can be held personally liable for unpaid superannuation when the company has not made payment; 3,660 director penalty notices have been issued.
What should employers do?
The ATO’s ability to obtain and analyse enormous amounts of data in close to real time means employers must be on top of their game.
It’s important for employers to regularly review their time and attendance and/or payroll systems to ensure superannuation contributions are correctly calculated and remitted to the right superannuation accounts by the due date.
When an error is detected, correcting it by making a voluntary disclosure to the ATO provides the best opportunity for having additional penalties waived. It is also easier for employers to manage the employee engagement aspects, rather than being on the back foot when employees have made a complaint to the ATO.
Employers who receive a reminder or prompt from the ATO should immediately check their contribution records and, if required, take steps to correct any instances of non-compliance. The ATO is right in most cases.
Finally, superannuation compliance may become even more challenging from 1 July 2026, with the proposal presented in the 2023–24 budget that would require employers to pay superannuation contributions at the same time as they pay wages. If legislation is enacted, payday superannuation would be a game changer.
Ben Renshaw
James Trainor
BDO in Australia