Treasury Laws (Recovering Unpaid Superannuation) Bill 2019

Senator VAN (11:24): I rise to speak on the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019.

The Coalition Government have a strong record on supporting the small businesses that employ Australians. It is in our blood.

As you may recall from my maiden speech, I ran my own small business firm for 15 years prior to coming to this place. I understand the challenges that small businesses face, and I have always worked hard to get them a fairer go.

Small businesses are prevalent in all sectors of the economy and in all of Australia’s regions. Small businesses comprise 9 out of 10 Australian businesses. A healthy small business sector is thus a prerequisite for a growing economy with high employment opportunities.

In fact, small and medium businesses are a major employer in the Construction industry; the Agriculture sector; Rental, hiring and real estate services; the Retail Industry; and accommodation and food services.

From the local café down the road from my home, through to the pharmacy owned by the husband and wife team: there’s no doubt that small business are the backbone of our economy.

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 –

• Indirectly, by creating a business framework or environment they can work and thrive in. By having policy settings that reduces red tape, lowers taxes, workplace laws and supports for fairer competition; and

• 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 is a superannuation guarantee amnesty which was first announced by the Government on 24 May 2018.

The amnesty is designed to encourage employers who were not compliant in the past to come forward to ensure employers 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 day 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 the 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 7000 employers have come forward. This means that the employees of these 7000 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 exclusively designed to benefit employees.

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, come forward in good faith and pay anything that is owed before the ATO begins using its new enforcement tools.

Employers with historical superannuation underpayments who fail to voluntarily disclose the underpayments during the amnesty period, and are found non-compliant by the ATO after the amnesty period 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.

Furthermore, the ATO is cracking down harder on the underpayment of super.

It has updated its practice guidance in relation to the remission of 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.

The stick being the higher minimum penalty and higher default penalty.

This Bill complements the Superannuation Guarantee Integrity Package legislated last year. It provides employers with a chance to come clean and pay their historical superannuation debts before the new enforcement arrangements come into effect.

Our  reforms also improved the integrity of the superannuation guarantee system and we can now better detect and deter non‑compliance 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 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 and MYOB, they will know how easy it now is to click a button to generate the BAS statement. It is a game-changer for small business.

The Morrison Government has also taken strong action to protect Australians’ compulsory superannuation and ensure they are paid the superannuation they are due.

These reforms do not only benefit employers, they importantly benefit and better protect employees and 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 non-compliance early, and 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.

The Government has also introduced serious consequences for employers who short change their employees, by strengthening the ATO’s collection and enforcement capabilities.

The ATO now 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 directions 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 superannuation, the ATO can now inform all potentially affected employees of any ongoing investigation into their employer’s 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 other 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 dollars in the 2018-19 Budget.

In financial year 2018 to 19, the ATO contacted more than 22,000 employers as a result of reviews or audits, and recovered over 805 million dollars in unpaid superannuation for employees.

The Government’s action to crack down on superannuation non-compliance complements reforms to protect low balance and inactive superannuation accounts from undue erosion, and put members interests’ first.

The Protecting Your Superannuation Act commenced on 1 July 2019 and protects the hard-earned superannuation savings of Australians from excessive fees, unnecessary insurance premiums and inefficiencies from 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 inappropriate erosion of retirement savings for cover that members do not know they have, that 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 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 have balances under 6000 dollars, 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 – and I quote:

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 them.

Similarly as my colleague, the Honourable Michael Sukkar MP, has said in the other place – and I quote:

Given the significance of superannuation to Australians’ retirement, the government wants to ensure that people’s hard-earned savings are not unnecessarily eroded by inappropriate insurance arrangements.

Superannuation is now the second-largest savings vehicle for Australian households, and 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 premiums and 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 tax office data shows 96 per cent of young people under 25 don’t have dependants, it did make us wonder why they are automatically billed for death and disability insurance when they are signed up to super.

Secondly, it was odd that when young workers joined their employer’s super fund, they were likely to be automatically enrolled in insurance for death, disability and possibly income protection, without first asking the employee for permission.

Thirdly, one in four people simply did not know what they were covered for, or 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 to the benefit of their employees.

As the employer of many everyday Australians, by supporting small business, we are supporting workers.

I commend this Bill to the Senate.