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Thursday, 2 December 2004
Page: 158


Senator Brown asked the Minister representing the Treasurer, upon notice, on 18 November 2004:

With reference to the Australian Taxation Office (ATO) and the non-payment of superannuation contributions by small businesses:

(1) Why are the proceeds of fines that the ATO collects from companies that are in breach of the requirement to pay staff superannuation not distributed to the employees who are often left out of pocket.

(2) While the ATO states that it requires the company to pay the employees' contributions as well, if these companies go bankrupt before the contributions are paid is it the case that the ATO is paid but the employees are not.


Senator Coonan (Minister for Communications, Information Technology and the Arts) —As the question deals with matters administered by the Australian Taxation Office, I have asked the Commissioner of Taxation for advice. The advice in relation to the honourable senator's questions is as follows:

(1) The Superannuation Guarantee Charge (SGC) is a tax and employers can reduce their liability to the SGC by making sufficient superannuation contributions to a complying superannuation fund or retirement savings account for each of their eligible employees.

Where an employer does not make sufficient superannuation contributions they are subject to the SGC payable to the ATO. The SGC comprises the employer's individual superannuation guarantee shortfall for the quarter, the employer's nominal interest component for the quarter and the employer's administration component for the quarter. Once the SGC payment is received from the employer the ATO pays the individual superannuation guarantee shortfall and the nominal interest component of the SGC to the employee's complying superannuation fund or retirement savings account or directly to the employee.

Further, as the SGC is a tax related liability for the purposes of the Taxation Administration Act 1953 where an employer has not paid their SGC debt they will be subject to a general interest charge (GIC) and potentially an additional penalty depending on the taxpayer' behaviour. For SGC purposes the GIC is paid to the employee for the loss of earnings on the amount of the superannuation guarantee shortfall (which forms part of the SGC) not paid by the employer within a certain time. The additional penalty is retained by the ATO as it is a penalty on the employer for not meeting their tax obligations.

(2) Previously, the SGC had no priority where an employer became bankrupt. As such, the SGC debt was placed as an unsecured creditor reducing the ability for the ATO to recover the amount of the SGC. It should be noted that the Commissioner has always had a priority for the SGC amount where a company goes into liquidation and is ranked as a secured creditor in line with salary or wages for the employee.

In 2002/03 amendments were made to the Superannuation Guarantee (Administration) Act 1992 and the Bankruptcy Act 1966 to enable a priority of the recovery of SGC debt in cases of bankruptcy. These changes now mean that the ATO is in a better position to recover any SGC owed by employers who become bankrupt.

Where the SGC is recovered by the ATO, the superannuation guarantee law and the ATO's receivables management policy ensures that the employee's superannuation guarantee entitlements are paid before other employer related tax debts.