Tax Office to chase directors over super

COMPANY directors will be liable for unpaid employee superannuation entitlements, as recommended in a new report.

By InvestSMART · 25 Nov 2010

By InvestSMART ·
25 Nov 2010

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COMPANY directors will be liable for unpaid employee superannuation entitlements, as recommended in a new report.

The federal government yesterday released a report by the Inspector-General of Taxation reviewing the Australian Taxation Office's administration of the compulsory superannuation guarantee, completed in March.

The Inspector-General, Ali Noroozi, said the superannuation system worked well for most Australians, but some vulnerable groups were more likely to be short-changed, including younger workers, employees of "micro-businesses", casual or contracted workers and those incorrectly classified as contractors.

"It is these very people who are most reliant upon compulsory superannuation contributions for a higher standard of living in retirement beyond the age pension," Mr Noroozi said.

He made 10 recommendations to the Tax Office and two to the government, including some relating to the identification of superannuation not being paid and expediting Tax Office response time.

Recommendations were also made to further deter late payment of superannuation entitlements, and to better protect entitlements when an employer becomes insolvent.

The Tax Office has agreed with all but one recommendation in the report rejecting the need to concentrate on auditing "high-risk" employers who have not paid superannuation.

It said that, in light of the range of other tax and superannuation risks the Tax Office must tackle, "the current level of resources allocated to addressing super guarantee risks is appropriate".

Assistant Treasurer Bill Shorten said the extension of company director penalties would act as a deterrent to employers who did not pay superannuation and would discourage "phoenix" businesses that were set up and allowed to fail, without paying tax, creditors or employees.

Mr Shorten said the government, as part of the Labor Party's election promises, had already adopted most of the policy recommendations, and that the government agreed with Mr Noroozi on the matter of providing strong protection for workers' superannuation.

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Frequently Asked Questions about this Article…

What did the Inspector‑General of Taxation recommend about company directors and unpaid superannuation?

The report recommended that company directors be held liable for unpaid employee superannuation entitlements. It flagged director liability as a tool to improve enforcement of the compulsory superannuation guarantee.

Which groups of workers are most likely to be short‑changed on superannuation?

The Inspector‑General identified several vulnerable groups more likely to miss out on super: younger workers, employees of micro‑businesses, casual or contracted workers, and people who are incorrectly classified as contractors.

What specific recommendations were made to the Tax Office and the government to tackle unpaid super?

The report made 10 recommendations to the Tax Office and two to government, including better identification of unpaid superannuation, faster Tax Office response times, stronger deterrents against late super payments, and improved protections for entitlements when an employer becomes insolvent.

How did the Australian Taxation Office respond to the report's recommendations?

The Tax Office agreed with all but one recommendation. It rejected the recommendation to concentrate audits solely on so‑called high‑risk employers, saying the current level of resources allocated to super guarantee risks is appropriate given the range of other tax and super risks it must manage.

What did the government say about implementing the report’s recommendations?

Assistant Treasurer Bill Shorten said the government, as part of Labor’s election commitments, had already adopted most of the policy recommendations and agreed with the Inspector‑General on providing strong protections for workers’ superannuation.

How would extending director penalties help stop employers not paying superannuation?

According to Assistant Treasurer Bill Shorten, extending company director penalties would act as a deterrent to employers who do not pay super and would discourage 'phoenix' businesses that are set up to fail without paying tax, creditors or employees.

What did the report say about protecting employee super when an employer becomes insolvent?

The report recommended stronger measures to protect employees’ superannuation entitlements in the event an employer becomes insolvent. The article does not provide detailed policy mechanics, only that protections should be improved.

What does this report mean for everyday investors concerned about corporate behaviour and superannuation compliance?

For everyday investors, the report signals tougher scrutiny and steps toward holding directors accountable for unpaid super, plus measures to deter phoenix activity. That could mean better protection for employees’ retirement savings and a push for more compliant corporate practices, though the Tax Office has not agreed to concentrate audits solely on high‑risk employers.