STP phase 2 to ‘trigger increase in ATO audits for health sector’, RSM predicts
Complex rostering arrangements used by the health sector are likely to make it a target for the ATO’s crackdown on payroll and SG errors, an employment tax specialist warns.
The introduction of single touch payroll (STP) phase 2 combined with the health sector’s complex rostering practices makes the sector more vulnerable to falling foul of the government’s crackdown on payroll and superannuation errors, RSM Australia has cautioned.
RSM national employment tax partner Rick Kimberley said an uptick in ATO audit activity had led to more companies proactively conducting superannuation and general payroll audits.
Mr Kimberley has conducted more than 20 of these audits in the past 12 months, double the average he normally would.
The health sector is at particular risk of an increase in ATO audit activity following the introduction of an STP phase due to a wide range of factors, he said.
“Healthcare organisations most commonly make underpayments because of the complexity of industrial agreements, given the volume of employees and large number of classifications applicable in the industry,” he stated.
“The sector also has under-resourced payroll teams who may not be provided sufficient guidance on the legal application of certain pay elements.”
Mr Kimberley said the sector also had a significant number of manual adjustments within the payroll function and a lack of formal approvals around overtime and time capture.
“RSM has identified that a number of organisations had trouble paying staff their correct entitlements,” Mr Kimberley said.
“These errors are being made not just by small and unsophisticated businesses – there are numerous examples of some of Australia’s most well-known and well-resourced employers making significant errors.”
At the same time, it is becoming easier with data analytics and real-time pay information for the ATO to detect non-compliance, said Mr Kimberley.
RSM Australia’s national health leader Jayesh Kapitan said while employers across all industries are experiencing constant challenges with wage and superannuation compliance, it is a heavier burden for the health sector to get this right.
“All industries are struggling with this issue, but health more than many other industries has the complexity of work outside ordinary hours – split shifts, callbacks, standby, very different employee types and often with a significant employee base,” said Mr Kapitan.
Mr Kimberley said that as high-profile underpayments and instances of non-compliance continue to occur, ensuring a health organisation reduces its risk by undertaking a detailed STP2 review is a great first step, followed by a transactional review to ensure a high level of assurance.
“The greatest lesson for these audits is to avoid them in the first place,” he said.
“The Australian Government has committed to introducing a criminal offence for wage underpayment, so it is important to check payroll systems are in order and payroll staff well trained in compliance, as the penalties for non-compliance can be severe.”
SG compliance checks on the rise
Mr Kimberley said the ATO’s bolstered detection tools along with its access to an unprecedented amount of pay data in real time is an important warning for all sectors including health.
“We expect increasing detection of non-compliance with the super guarantee,” he said.
The ATO has made it clear that it will continue to investigate every complaint received about non-payment of super guarantee.
There is also an expectation from employees, investors and other stakeholders that employers have taken steps to review their wage obligation compliance, particularly with the risk of non-compliance and its detection increasing, said Mr Kimberley.
“When an employer does this, and makes a voluntary disclosure, they are much more likely to receive a lesser financial penalty,” he said.
“It also allows them to show stakeholders (and in particular their employees) that the organisation proactively investigated whether or not they were paying staff correctly and addressed the issue.
“This is far more likely to garner a positive response from stakeholders than in the event the organisation was audited and significant underpayments were detected as a result.”
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