The Government’s proposed change to reduce the penalty for employers who pay their super guarantee (SG) late will help small businesses, the Institute of Public Accountants (IPA) believes.
Welcoming the proposal, the firm’s chief executive, Andrew Conway said the penalties are disproportionate to the mischief and have a significant impact on small businesses that make late payments due to cash flow issues.
“In fact, the penalty regime can lead to further non-compliance delays in employers making superannuation contributions. The onerous penalty regime has done little to address the problem of unpaid superannuation which some experts say is on the rise,” Conway said.
“Small businesses do not have access to the same resources of larger entities when cash is tight. Due to limited funds, one option for a small business is to delay payment of employee obligations. While we don’t condone this practice, for many small businesses it is a reality.”
Conway noted the interest charged, the administrative fee, and potential penalties are sufficient incentives for an employer to meet their SG obligations rather than pay the SG charge.
“Currently the SG is worked out based on the employee’s salary and wages which is a broader base than ordinary time’s earnings,” he said.
“We recommend moving to a single base for calculations, which will simplify the process for employers to comply with their super obligations.”
Last week, the Australian Institute of Superannuation Trustees rejected the proposal and said the system should reward employers who are good citizens and penalise those that make late payments.
