ATO activity to address superannuation guarantee non-compliance is not as effective as it should be, according to the latest report from the Australian National Audit Office.
The ANAO calculated the ATO was owed $2.9 billion in tax charged to employers that failed to pay superannuation, with the shortfall around $5 billion a year.
The national auditor said the ATO’s compliance activities were only partly effective in achieving greater employer compliance with SG obligations.
“Although there has been an increase in the absolute amount of debt raised and funds collected, the ATO has acknowledged that it has a small influence on the net SG gap,” the ANAO said.
“Planned targeted reforms to improve the integrity and administration of the SG system were partly implemented.
“Although the ATO did not fully employ its SG debt-recovery powers during 2020, in line with its suspension of other ATO-initiated compliance work during the COVID-19 pandemic, SG debt increased at a higher rate than total ATO debt in 2020–21.”
The audit office said there had been an increase in the absolute amount of debts raised and funds collected over the past four years.
Between 2013-14 and 2018-19, the Tax Office’s compliance activities in detecting and collecting unpaid super amounted to less than 15 per cent per year of the estimated amount of unpaid super.
“The ATO did not consistently meet service commitments for reactive corrective compliance activities,” the national auditor said.
“A commitment that 40 per cent of corrective compliance activities would be proactive was reported as met in three of four years to 2020-21.
“However, there has been a shift from resource-intensive audit activity to low-touch nudges.”
The report also found proactive compliance activities declined after the SG taskforce was introduced in 2017 and the taskforce had not achieved all of its planned outcomes.
It had achieved a higher strike rate from a smaller case pool, but it did not achieve several of its objectives associated with the usage of single touch payroll and other data.
“The level of proactive compliance activities undertaken by the ATO declined after the SG Taskforce was introduced,” the ANAO said.
“The SG amnesty supported the ATO’s transition to a preventative compliance approach by encouraging employers to self-correct non-compliance and is associated with higher voluntary employer lodgments.
“The ATO did not report on SG Taskforce outcomes. Its reporting of SG amnesty outcomes could have been improved by adjusting the results achieved to account for the business-as-usual level of voluntary lodgments.”
The ATO had also been partly effective in using its debt recovery powers to collect unpaid SG.
The audit office said enforcement pauses during the bushfires and coronavirus pandemic meant the Tax Office was only partially effective in using its debt recovery powers.
Stronger enforcement powers received in January 2019 had largely not been exercised and firm compliance activity was used less frequently during 2019-20 and 2020-21.
The audit office urged the ATO to better use its enforcement and debt recovery capabilities to get back the money entitled to workers.
It also recommended the ATO to implement a proposed preventative approach to SG compliance and assess performance measures against the Public Governance, Performance and Accountability Rule 2014 and enhance its public SG performance information.
The Tax Office agreed to two of the recommendations in the report, while it partly agreed to the calls to improve performance information.
The ATO said in response to the report it would strengthen its powers to enforce unpaid super.
“We will make more use of our debt recovery powers now that firmer recovery action has recommenced following the pandemic,” the ATO said.
“We will explore opportunities to enhance our performance measures and commentary on superannuation guarantee performance information.”
The ATO said it had also increased the visibility of employer superannuation contributions through myGov in recent years.
“We continue to investigate every complaint received in relation to the non-payment of SG as we work to reduce the overall SG Gap,” the ATO said.
“With access to greater levels of real-time payroll data through Single Touch Payroll, we acknowledge the challenge we have to effectively utilise these large volumes of data in real-time to proactively improve compliance.
“We recognise the complexities we face around insolvent entities and will continue our consideration of this employer population through our debt recovery engagement actions.”
Tony Zhang is a journalist at Accountants Daily, which is the leading source of news, strategy and educational content for professionals working in the accounting sector.
Since joining the Momentum Media team in 2020, Tony has written for a range of its publications including Lawyers Weekly, Adviser Innovation, ifa and SMSF Adviser. He has been full-time on Accountants Daily since September 2021.