IFPA calls for ‘fairer and proportionate’ SG penalty regime
The SG penalty regime should apply different penalties for accidental late-payers versus deliberate non-paying employers, the government has been told.
The Institute of Financial Professionals Australia (IFPA) has broadly welcomed proposed changes to the superannuation guarantee (SG) system but has urged the government to use it as an opportunity to fix the current issues in the system.
The government unveiled measures to implement reforms to the payment of superannuation guarantee last month, which would require employers to pay super on the same day as salary from 1 July 2026.
In a recent submission to Treasury, IFPA said it supports the proposal to require employers to pay super at the same time as salary and wages but would like to see the system move to a ‘payment date model’.
“We recommend redesigning the SG system by moving from the current ‘due date’ or receipt date model to a ‘pay date’ model. This pay date model would impose the requirement on the employer to make payment of SG contributions on the day that salary and wages are made,” the submission said.
IFPA head of superannuation and financial services Natasha Panagis said this will help facilitate the objectives of the payday legislation better, as employers will see the payment of SG as a usual and expected part of paying salary and wages.
It may also encourage payroll software providers to integrate the payday super payment into their process for payday, the IFPA said.
“Under this model, as long as employers have made the payment of their contributions on payday and those payment details are correct, then any delays in receipt that may occur behind the scenes would not impact the employer as they have met their obligation to pay SG to their employee’s superannuation fund or the superannuation clearing house. That is, provided payment is paid out on time, the employer will not be liable for penalties that result in delay in receipt,” the submission stated.
The IFPA has also urged the government to look at introducing a fairer and more proportionate penalty regime.
Under the current penalty regime, employers who accidentally don’t pay on time or make contributions to the wrong superannuation fund are penalised at the same harsh rate as employers who deliberately do not make SG contributions for their employees.
This means late-paying employers are still required to lodge an SG charge statement, pay the SG charge, lose deductibility for the contributions and are subject to Part 7 penalties of 200 per cent, the submission noted.
Board Member and Chair of the Superannuation Technical and Policy Committee, Phil Broderick, said a fairer and proportionate penalty regime must be introduced to differentiate between infrequent late-paying employers and deliberate non-paying employers.
“We recommend the government introduce a graduated penalty regime that is lenient on infrequent late-paying employers and is harsh on deliberate non-paying employers,” said Mr Broderick.
“This could be based on the income tax regime. For example, 25 per cent for failure to take reasonable care, 50 per cent for recklessness and 100 per cent for deliberate non-payment.”
Mr Broderick said this change will see late-paying employers not being as severely penalised or slugged by late payment penalties compared with non-payers.
“Rather, the penalty for late-paying employers is proportionate and reasonable,” he said.
The submission has proposed the following model:
- For employers who make the payment of contributions on time, no penalties and the contributions are deductible.
- For employers who pay contributions but pay them late, they must pay interest from the payment due date but otherwise, no other penalties, no obligation to lodge an SG charge statement, no other penalties and the contributions and interest are deductible.
- For employers who don’t make contributions, SG charge assessments would be issued by the ATO, graduated penalties would apply (based on culpability) and the SG charge would not be deductible.
IFPA said this model will encourage and incentivise compliance as employers will make these payments quite readily as they will be penalised with a certain percentage of interest from payday.
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