ATO only partly successful on SG non-compliance

Mike Taylor

Managing Editor/Publisher, Financial Newswire

2 May 2023

The Australian Taxation Office (ATO) has only ever been partly successful in addressing superannuation guarantee (SG) non-compliance, according to a new report released by the Australian National Audit Office (ANAO).

What is more, the audit office has found that planned targeted reforms to improve the integrity and administration of the superannuation guarantee system have only been partly implemented, in part because of the ATO’s approach to the COVID-19 pandemic.

Those planned targeted reforms included the implementation of one touch payroll and the efforts of the superannuation guarantee taskforce.

The audit report also pointed out that the net superannuation gap had not improved in a decade. hIt found that the ATO had been party effective in using its debt recovery powers to collect unpaid superannuation guarantee contribution and that pauses in enforcement during the 2019-20 bushfires and COVID-9 pandemic impacted debt recovery by:

• stronger enforcement powers received in January 2019 have largely not been exercised;
• firm compliance activity was used less frequently during 2019–20 and 2020–21; and
• elements of new systems were turned off.

In the wake of its findings, the ANAO has recommended that the ATO make more use of its enforcement and debt recovery powers and actually identify those companies holding the majority of debt for priority treatment.

“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 report said.

On the question of whether the ATO’ compliance activities had improved employer compliance, the ANAO delivered a mixed report card, stating that “while there is some evidence that the ATO’s compliance activities are improving employer compliance, the extent of improvement cannot be reliably assessed”.

“Public reporting of performance does not provide adequate information to evaluate the effectiveness of the ATO’s SG compliance activities. The ATO advised that a growing backlog of employee notifications of employer non-compliance was cleared by December 2021,” it said. “There has been an increase in the absolute amount of debts raised and funds collected over the past four years.”

“Although there has been a downward trend since 2013–14, the net SG gap reported for 2018–19 was little different from the gap reported for 2009–10. Between 2013–14 and 2018–19, the ATO’s compliance activities detected and collected unpaid SG amounting to less than an average of 15 per cent per year of the gross SG gap.”

“The ATO did not consistently meet service commitments for reactive corrective compliance activities. 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.”