15 May 2022

ATO needs to lift game collecting unpaid superannuation, audit finds

| Ian Bushnell
Join the conversation
Australian dollar bills

ANAO says the Tax Office’s compliance activities are only partly effective. Photo: File.

The Australian Taxation Office (ATO) has been urged to increase its enforcement, take more of an industry-based and preventative approach and set performance targets to improve its collection of workers’ unpaid superannuation from employers.

The Australian National Audit Office (ANAO) has found that the ATO has only been partially effective in identifying and dealing with employers who try to avoid paying the Superannuation Guarantee (SG) introduced in 1992.

Employer SG contributions in 2020/21 were $74.1 billion. The amount of SG debt was $2.7 billion.

The audit found that the ATO had not fully implemented its risk-based compliance strategy, which is designed to shift the focus from a reactive approach through enforcement to a preventative approach that encourages voluntary compliance.

It found compliance activities were still largely reactive. Furhter, the preventative approach depended on being able to match data but technology issues had limited the use of real-time data-driven analysis.

READ ALSO ANAO sacked auditor unfairly, Fair Work Commission finds

The ATO did not specifically target higher-risk industry sectors but selected cases where the greatest debt could be recovered and there was a greater likelihood of a higher strike rate.

In 2016 the ATO began to develop a high-risk industry strategy that would target three industries – cafés and restaurants, hairdressing and beauty services and investigation and security services – but it was not pursued.

The ATO told the ANAO in February that a pilot program targeting the café and fast food industry, identifying about 500 employers using existing data analytic tools, would be finalised by the end of April 2022.

The ATO’s top-down approach to measuring the SG gap or percentage of employers not paying up does not provide risk intelligence by market segment or industry sector. The audit says a bottom-up approach using tax and superannuation data at the individual employer and employee level has the potential to provide this information.

The audit says it was hard to measure the success of the ATO’s compliance activities due to a lack of information.

“While there is some evidence that the ATO’s compliance activities are improving employer compliance, the extent of improvement cannot be reliably assessed,” the audit says.

“Public reporting of performance does not provide adequate information to evaluate the effectiveness of the ATO’s SG compliance activities.”

READ ALSO High Court cases raise bar on employee/independent contractor question

The audit recommended that the ATO implement the proposed preventative approach to SG compliance in its risk-based compliance strategy.

It also recommended it review its performance measures including setting targets and providing more public information including explanations of results and changes.

The audit found that the 2019/20 bushfires and COVID-19 pandemic impacted debt recovery but compared to the increase in total ATO debt during 2020/21, SG debt increased disproportionately.

It says stronger enforcement powers received in January 2019 have gone largely unused, firm compliance activity was less frequent during 2019/20 and 2020/21 and elements of new systems were turned off.

“Pauses in enforcement were intended not to apply to egregious and criminal cases but enforcement against phoenix operators through Director Penalty Notices also decreased from 2018/19,” the audit says.

The audit urged the ATO to make greater use of its enforcement and debt recovery powers and develop performance measures for evaluating the effectiveness of debt recovery.

The ATO agreed to all recommendations.

Join the conversation

All Comments
  • All Comments
  • Website Comments

The ATO needs to look no further – over 2500 employee’s from 3 large Commonwealth Departments aired owed million$ in un-paid (under reported) Superannuation contributions. What makes it worse is they all knew there was a problem in 2008 and put their collective heads in the sand……………..the sooner wage / superannuation theft is legislated as a criminal offence the better.

Daily Digest

Want the best Canberra news delivered daily? Every day we package the most popular Riotact stories and send them straight to your inbox. Sign-up now for trusted local news that will never be behind a paywall.

By submitting your email address you are agreeing to Region Group's terms and conditions and privacy policy.