Reforms for greater accountability over employee superannuation

In response to increased media scrutiny on the superannuation guarantee gap in recent financial years, the Federal Government announced a number of significant reforms to superannuation during September.

The first package of reforms will give the Australian Taxation Office (ATO) near real-time visibility over superannuation guarantee (SG) compliance by employers. The Government will provide the ATO with additional funding for a SG Taskforce to crackdown on employer non-compliance. The package also includes measures to:

·       Require superannuation funds to report contributions received more frequently, at least monthly, to the ATO.

·       Bring payroll reporting into the 21st century through the rollout of Single Touch Payroll (STP). Employers with 20 or more employees will transition to STP from 1 July 2018 with smaller employers coming on board from 1 July 2019.

·       Improve the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and use of security bonds for high-risk employers.

·       Provide the ATO the ability to seek court‑ordered penalties in the most egregious cases of non‑payment.

The Government has also announced a number of changes to promote high standards of transparency and accountability within the superannuation system. These changes, which apply equally to all Australian Prudential Regulation Authority (APRA) regulated superannuation funds, include:

·       Making super funds more transparent and accountable for how they spend members’ money through new reporting of expenses, annual member meetings and a portfolio holdings disclosure regime.

·       Strengthening APRA’s powers to regulate funds and take preventative or corrective action where a fund is not acting in the best interests of members.

·       Giving more than one million workers the right to choose their own superannuation fund if they are currently prevented from doing so because of enterprise bargaining agreements or workplace determinations.

·       Closing a legal loophole being used by some unscrupulous employers to short-change workers of their full superannuation guarantee entitlements.

·       Legislating a consistent minimum standard for one-third independent directors, including an independent chair, to facilitate more diversity and skills and to improve governance by strengthening conflict management across the entire industry.

·       Strengthening all default MySuper products offered across the industry, which, at June 2016, included 46 retail, 43 industry, 15 corporate and 11 public sector fund MySuper Products.

The legislation in relation to these reforms is currently being debated before Parliament (refer to the Legislative Update section for further information).

Western Australian 2017-18 State Budget

The Western Australian (WA) Government released its State Budget for the 2017-18 financial year in September. As part of the budget announcements, a temporary progressive payroll tax rate increase will apply to large businesses from 1 July 2018 to 30 June 2023.

During this period, WA employers with an Australia-wide payroll in excess of AUD100 million will pay a marginal tax rate of 6 per cent (up from 5.5 per cent), while those employers with an Australia-wide payroll over AUD1.5 billion will be subject to a marginal rate of 6.5 per cent.

No changes will be made to the calculation of the diminishing tax-free threshold, which will continue to gradually phase out for employers (or groups of employers) with annual taxable wages in Australia between AUD850,000 and AUD7.5 million. Employers with annual Australian taxable wages of AUD7.5 million or more will pay payroll tax on their entire taxable wages.

Increased access to the Small Business Superannuation Clearing House

The ATO has announced that more employers will now have access to the Small Business Superannuation Clearing House free online service. The service is intended to help reduce red tape and superannuation compliance costs for small businesses.

Employers can now use the ATO’s Small Business Superannuation Clearing House if they either have:

  • 19 or less employees; or

·       an annual aggregated turnover of $10 million or less.

For eligible employers, super guarantee contributions for all employees can be made as a single electronic payment to the Small Business Superannuation Clearing House. The clearing house will then distribute the payment to employees’ super funds on the employer’s behalf.

Revenue NSW Ruling on the value of fringe benefits for payroll tax purposes

Revenue NSW has updated its Revenue Ruling PTA 003, which outlines how the value of fringe benefits is to be declared for payroll tax purposes. The updated ruling addresses the following:

·       Calculating the value of fringe benefits for payroll tax purposes.

·       Clarifying the treatment of fringe benefits with a nil taxable value and exempt benefits where such benefits also fall within another part of the definition of wages.

·       Explaining the requirements of the alternative method of declaring fringe benefits.

·       Explaining the method of calculating the NSW component of fringe benefits when they are not readily identifiable.

·       The adoption of ATO fringe benefits tax rulings.

Failing to remit PAYG withholding

The High Court in Panayi v Deputy Commissioner of Taxation [2017] HCASL 238 has refused the taxpayer’s application for special leave to appeal against the decision of the Supreme Court of NSW in relation to director penalties. The Supreme Court of NSW (Court of Appeal) previously upheldthe decision of the District Court of NSW, which found that the taxpayer, as the director of a company, was personally liable to pay director penalties for failing to remit PAYG withholding from wages and salaries of the employees of the company.

Non-profit association not exempt from payroll tax

The Supreme Court of South Australia has held that a non-profit association was not exempt from payroll tax under the charitable purpose exemption as it failed to prove on a holistic assessment that its dominant purpose was to advance trade and commerce in South Australia (South Australian Employers’ Chamber Of Commerce & Industry Incorporated v Commissioner of State Taxation [2017] SASC 127