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ATO ‘let bosses off super penalties’

AUSTRALIAN BUSINESS REVIEW   October 24, 2018   Michael Roddan

The Australian Taxation Office has admitted it failed to apply the law and allowed businesses to skirt any penalty for failing to pay employees’ superannuation.

ATO deputy commissioner James O’Halloran, who is in charge of the department’s superannuation division, told a Senate estimates hearing he had mistakenly believed the tax office had the discretion to waive penalties to businesses that came forward and declared they had failed to pay into workers’ superannuation.

The ATO is required by law to apply a $20-an-employee-a- quarter penalty to employers who fail to contribute to workers’ nest eggs. It is mandatory for employees to pay 9.5 per cent of wages into super.

“There was a period, certainly, where I felt that under the law, we did have some discretion and we did not apply a $20 admin penalty,” Mr O’Halloran told senators. “Obviously last year was a big year of super guarantee focus; I sought clarification on what sort of discretion the commissioner may have had in terms of application of the penalty.

“That’s when I stopped that process occurring. I didn’t want to put the staff in jeopardy of remitting that penalty.”

The admissions came after questioning from Labor senator Chris Ketter, who hounded the ATO over figures showing the number of bosses failing to pay employees’ superannuation had increased by more than 50 per cent in the past year — breaches that are soon to carry penalties of up to a year in jail for employers.

It also follows evidence to the banking royal commission that financial watchdogs the Australian Securities & Investments Commission and the Australian Prudential Regulation Authority failed to pursue companies for breaches of the law and seek to apply the maximum penalties.

ATO data says the number of employers forced to lodge a superannuation shortfall statement after failing to pay the required amount on time surged 60 per cent to nearly 18,000 companies in the past financial year. The ATO has estimated that between 2 per cent and 11 per cent of businesses fail to pay super each year, and workers are missing out on about $2.85 billion in super annually.

Industry Super Australia believes it is closer to $6bn.

Under new laws, businesses have a 12-month amnesty to pay unpaid super to workers, with interest, or face new penalties. It is estimated this will mean $230 million in unpaid super being handed to about 50,000 employees.

“Given the scale of the unpaid super problem, it beggars belief that the ATO would waive all statutory penalties for eight out of 10 employers who don’t meet their legal obligations,” Industry Super Australia public affairs director Matt Linden said. “Employers who do the right thing should be furious the ATO is effectively sanctioning late payment of super by their competitors.”

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