Draft legislation recently released for consultation by the Treasury shows considerable promise for reducing the current complexity faced by employers in calculating their employees' superannuation guarantee entitlements.

These developments follow the release of the Board of Tax report on tax impediments facing small business earlier this year which highlighted the high compliance costs for small business meeting their obligations under Australia's complex tax and superannuation systems.

The proposed changes to the Superannuation Guarantee (Administration) Act 1992 (Cth) (Act) are usefully summarised in the explanatory memorandum. We have added additional commentary to explain how each change is effected:

Current law

New law

Effected by

An employer's liability to superannuation guarantee charge is calculated based on the employee's salary or wages.

An employer's liability to superannuation guarantee charge is calculated based on the employee's ordinary time earnings.

Amending the formula in section 19(1) of the Act to refer to the definition of "ordinary time earnings". A simpler definition of "ordinary time earnings" will be introduced into section 6 of the Act, which will directly incorporate the maximum contribution base concept. As a result, section 19(3) will be repealed.

Nominal interest is imposed on the total of the employer's individual superannuation guarantee shortfalls from the beginning of the relevant quarter until the date on which superannuation guarantee charge is payable.

Nominal interest is imposed on each of the employer's individual superannuation guarantee shortfalls from the 29th day after the end of the relevant quarter until the day that late contributions are paid in full for the employee, or the day before the day on which superannuation guarantee charge is payable.

Existing section 31 of the Act will be replaced with a new section 31 which contains a new definition for "nominal interest component".

If an employer refuses or fails to give the Commissioner of Taxation a superannuation guarantee statement or information relevant to assessing their superannuation guarantee charge liability for a quarter they are liable to pay additional superannuation guarantee charge penalty under Part 7 of the Act equal to up to 200 per cent of the superannuation guarantee charge payable.

If an employer refuses or fails to give the Commissioner of Taxation a superannuation guarantee statement or information when required they are liable to an administrative penalty under the Tax Administration Act 1953 (Cth).

Part 7 (which imposes additional superannuation guarantee charge) is completely repealed, with consequential amendments to reflect this change.

The existing exemption from administrative penalties for failing to lodge the superannuation guarantee statement on time in section 286-75(2)(b) of Schedule 1 Tax Administration Act 1953 (Cth) is repealed.

If enacted, these changes are expected to commence on 1 July 2016. Public consultation on these reforms runs until 18 September 2015.

If you have any queries about how these changes affect your business, or would like assistance in preparing a submission to the consultation, please contact a member of our team.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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