THE organisation that for years administered MTAA Super one of the nation's biggest industry superannuation funds is facing a payroll tax investigation for a discrepancy of millions of dollars that it paid in directors' fees over a five-year period.
The ACT government, which oversees the collection of payroll tax from businesses registered in Canberra, has also raised concerns over incomplete employee records supplied by the motor trade association.
The MTAA owns the MTAA Super trustee company. Over the years the motoring body has directed a substantial amount of members' retirement savings into the super fund. Until December last year the motoring body also provided administrative support and management of the $5.8 billion fund.
Long-serving executive Michael Delaney last year stepped down from his dual role at the head of both MTAA Super and the national motoring body.
MTAA Super last year paid MTAA $8.5 million as part of a service agreement deal.
Given the close links between the two organisations, the developments could represent a further headache for MTAA Super, which has come under a separate investigation from finance regulator the Australian Prudential Regulation Authority.
Earlier this month, MTAA Super chairman John Brumby detailed a top-level overhaul of the fund. This includes the planned exit of Mr Delaney in November and the retirement of two long-serving directors.
Documents from the ACT Revenue Office obtained by BusinessDay raise concerns over $1.78 million in directors' fees over a five-year period that were not declared.
They also highlight an apparent discrepancy between what was actually paid to MTAA's directors and what appeared in the organisation's annual accounts lodged with the Australian Securities and Investments Commission.
"I have grave concerns about MTAA's inability to provide year-to-date payroll and superannuation summaries from the payroll systems," the ACT Revenue Office said in a letter sent in March to MTAA's auditor, PricewaterhouseCoopers.
"I advise that the wage records, spreadsheets and information supplied to date contain conflicting information that I have not been able to reconcile," the letter said.
In the 2010 financial year, MTAA paid $724,957 in directors' fees, according to accounts lodged with the Australian Securities and Investments Commission. But according to the ACT Revenue Office, only $366,933 was declared. The letter also narrowed in on incomplete information on fringe-benefits payments to some staff.
MTAA executive director Richard Dudley confirmed that discussions with the ACT Revenue Office were continuing. "They've had some queries and we've responded to those queries but, because the matter pertains to staff entitlements and other associated matters, I'm not willing to comment any further," he said.
Mr Dudley took charge of MTAA at the start of this year.
The ACT Revenue Office declined to comment on the letter.
The query is also expected to put the spotlight on PwC, which has provided advice on directors' fees for both the motoring group and the super fund.
Earlier this year, APRA launched a review of MTAA Super over an apparent lack of currency hedging during late 2008 that left fund members heavily exposed to losses. Mr Delaney has been critical of APRA's investigation and previously insisted that the super fund was hedged during the financial crisis.
Recent figures compiled by Chant West show the MTAA balanced fund came in last of the 50 funds it tracks. It returned 4.7 per cent over the year to June, trailing the average 10 per cent return for funds in this category.
Frequently Asked Questions about this Article…
What is the MTAA payroll tax investigation about?
The ACT Revenue Office is probing the Motor Trades Association of Australia (MTAA) over a payroll tax discrepancy involving millions of dollars, including concerns about about $1.78 million in directors' fees over a five-year period that were not declared and incomplete payroll and employee records.
How could the MTAA payroll tax probe affect MTAA Super members and the super fund?
Because MTAA owns the MTAA Super trustee company and until December provided administration and management to the $5.8 billion fund, the payroll tax questions and incomplete records could attract additional scrutiny for MTAA Super, which is already under review by the Australian Prudential Regulation Authority (APRA).
What specific discrepancies did the ACT Revenue Office flag in MTAA's accounts?
Documents obtained by BusinessDay show the ACT Revenue Office raised concerns about $1.78 million in undeclared directors' fees over five years, a mismatch in 2010 financial year figures (accounts lodged with ASIC showed $724,957 in directors' fees while only $366,933 was declared to the ACT), conflicting wage spreadsheets and incomplete fringe‑benefits information.
What payments and service arrangements existed between MTAA and MTAA Super?
MTAA Super paid MTAA $8.5 million last year under a service agreement. Historically the motoring body directed a substantial amount of members' retirement savings into the fund and provided administrative support and management of the $5.8 billion MTAA Super until December of the prior year.
What other regulatory review is MTAA Super facing besides the payroll tax issue?
MTAA Super is the subject of a separate APRA review focused on an apparent lack of currency hedging during late 2008 that left members exposed to losses; this review preceded the payroll tax questions.
Have there been leadership changes at MTAA or MTAA Super related to these issues?
Yes. Long‑serving executive Michael Delaney stepped down from his dual role at MTAA and MTAA Super last year and a planned exit was part of a top‑level overhaul detailed by MTAA Super chairman John Brumby, which also includes the retirement of two long‑serving directors. Richard Dudley took charge of MTAA at the start of the year and has said discussions with the ACT Revenue Office are continuing.
What do performance figures say about MTAA Super's investment returns?
According to Chant West figures in the article, the MTAA balanced fund ranked last of the 50 funds tracked, returning 4.7% over the year to June compared with an average 10% return for funds in the same category.
What is PwC's role in the MTAA/MTAA Super situation and why might it be scrutinised?
PricewaterhouseCoopers (PwC) has been MTAA's auditor and provided advice on directors' fees for both the motoring group and the super fund. The payroll tax queries and discrepancies are expected to put a spotlight on PwC's role and the advice it provided.
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