The Tax Office’s intensified, data-led approach means that accountants have become inundated with superannuation reviews and audits.
Accountants sweat on ‘non-stop’ wave of ATO super audits
The ATO has been conducting audits of employer superannuation contributions at unprecedented levels in the wake of criticism by the Australian National Audit Office (ANAO) last year, accountants say.
They report a "huge" shift in superannuation audit volumes as well as a change in audit triggers and the Tax Office’s degree of scrutiny.
RSM global employment services partner Rick Kimberley said his firm had been involved in 20 superannuation audits in the past year, double what it would typically experience.
“I have never seen this level of auditing before,” he said. “In the last 12 months it really has ticked up a gear. Every day I’m getting an email about another organisation getting audited, so it’s just non-stop.”
He said the catalyst had been the ANAO’s April 2022 report, Addressing Superannuation Non-Compliance, which labelled the superannuation recovery strategy of the ATO as reactive and only partly effective.
Mr Kimberley said the ATO’s corporate plan, released last month, confirmed superannuation guarantee integrity as one of eight key focus areas this year.
The transition to STP2 last year and allocation of $27 million to the ATO in the 2023–24 federal budget to “improve data matching capabilities to identify and act on cases of SG underpayment by employers” were also cited as factors that contributed to the audit surged he experienced. He said that they not only gave the ATO the technological means to pursue its new-found audit appetite, but also contributed to a shift away from traditional audit triggers, such as employee complaints, towards data-based triggers based on finding discrepancies between business and superannuation funds.
Mr Kimberley, who has over a decade of experience representing employers across different industries including banks, hospitals and not-for-profits, expected superannuation audit levels to remain elevated in the short term.
“The amount of reviews that we’re seeing where organisations are getting it wrong is very high, and I don’t see how it’s going to decrease until a massive proportion of employers get to a point where they’re comfortable about getting it right,” he said.
“There’s very, very limited reviews that I’ve seen in my career which have been 100 per cent correct. I’ve literally looked at hundreds of reviews, but I could count on one hand the amount of clients that were really super clean.”
The difficulty of superannuation compliance has been compounded by the ATO’s shift from reviewing wage codes to going over payroll transaction data with a fine-tooth comb.
“The ATO is detecting a significant amount of non-compliance based on transactional errors”, Mr Kimberley said, adding that in some instances it had asked his clients for several years of transaction records involving millions of lines of payroll data.
He said mistakes came down to a mix of human and system error, and that employers had no oversight over their transactional data or “level of comfort that their data was correct” without conducting a detailed transactional review and undergoing testing using payroll models.
Grant Thornton employment solutions partner Elizabeth Lucas said businesses were concerned about reputational damage if they made incorrect salary and superannuation payments.
As a result, she said her practice had become increasingly involved in conducting superannuation reviews before audits could be triggered by the ATO.
“We’ve seen a lot more clients wanting to be on the front foot about it,” she said. “So we’re doing a lot more reviews and assistance with voluntary disclosures … looking at whether the organisation is paying their people appropriately is something that we’ve seen a big uptick in.”
She said the ATO had often waived penalties when businesses made voluntary disclosures.
“If the Tax Office comes to you to do a review on your super, and you’d get an audit that way, they have to give you a 100 per cent penalty, whereas if you go to them on the front foot, making a voluntary disclosure, you’ve got the opportunity to have penalties reduced down to nothing,” she said.
But the ATO had shown little sympathy when discovering superannuation non-compliance on their own, according to Mr Kimberley.
“If you do not make a voluntary disclosure, I have had some clients that have been faced with audit and who received 200 per cent penalties. It was pretty significant – in the hundreds of thousands,” he said.
“You’ve really got a choice here. Inevitably every organisation is going to be subject to some level of review, one way or another. You can choose to put your head in the sand, or you can choose to get on the front foot.”