Unpaid super penalties too light: ISA

Industry Super Australia suggests the Australian Taxation Office's approach to unpaid superannuation is becoming a moral hazard whereby employers think they can escape penalty.

Testimony from the ATO at the Senate Estimates committee for economics this week included the regulator saying it routinely waives all employer penalties for the late payment of super under Part 7 of the Superannuation Guarantee Administration Act.

Industry Super Australia said this concession came after data was presented to the Senate committee that 5296 "Part 2 penalties" were applied to 24,634 employers in the ATO's sights for failing to pay the correct superannuation on time.

Industry Super Australia deputy chief executive Matt Linden said the revelations suggest there is a basic failure to enforce the law which is likely contributing to the unpaid super problem.

"The wholesale waiver of statutory penalties prescribed under the law for failing to pay super on time is a green light to unscrupulous employers short-changing their workers' super," he said.

"The available penalties, which are equivalent to double (200%) of an employer's super shortfall, are not acting as a deterrent if employers can agree to pay late and have penalties waived.

"The ATO's so called 'practical compliance approach' is causing a textbook moral hazard where employers take the risk knowing they won't be caught or even if they are simply pay what they should have paid anyway (with nominal interest) and walk away."

He went on to say the $20 per employee administrative penalty which the ATO is "now apparently applying as a minimum is wholly inadequate and not even a parking ticket penalty."

ISA values unpaid super at about $6 billion per year and affecting one in three employees.

Its analysis of ATO data suggests the scourge of unpaid super is deteriorating with 2.98 million Australians being short-changed $5.9 billion in super entitlements in 2015-16, up 220,000 employees and $300 million compared to two years earlier. The average underpayment stood at $1994 or the equivalent of $77 per fortnightly pay.

Read more: SuperannuationSenateATO - Australian Taxation OfficeISA - Industry Super AustraliaAustraliansMatt Linden
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