Unfortunately, it is not unusual for franchisors to be in the position of dealing with franchisees that have not complied with their obligations as employees in paying the superannuation due to their employees. The laws surrounding this issue are expected to change shortly.

On 28 March 2018 the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 was introduced. It contains significant proposed changes aimed at strengthening compliance with superannuation guarantee obligations by employers, including recalcitrant employers who intentionally and repeatedly disregard their obligations and continuously fail to pay their superannuation liabilities.

The proposed legislation empowers the Commissioner of Taxation to issue directions to employers to undertake specific actions in instances where the Commissioner is satisfied that there has been a failure to comply with an obligation or a failure to pay a charge under the Superannuation Guarantee (Administration) Act 1992 (SGAA). The key features are as follows:

  • The Commissioner can issue a direction to an employer if the employer has failed to pay an amount of superannuation guarantee charge, or an estimate of superannuation guarantee charge, for a quarter.
  • The employer must ensure that the amount of the unpaid liability is paid within the period specified in the direction.
  • Failure to comply with the direction can result in criminal penalties (imprisonment for up to 12 months) and/or a maximum of 50 penalty units.

The Bill is significant as currently directors can be personally liable for unpaid superannuation guarantee obligations under the director penalty notice provisions. The proposed legislation extends a director's liability to include possible imprisonment.

It is proposed that the changes will have effect from 1 July 2018.

Note that the ATO has estimated that the superannuation gap, that is, the difference between the superannuation required to be paid and that is actually paid is in the order of AUD2.85 billion.