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Not so guaranteed: Superannuation guarantee and Australian small businesses

Published on 01 Mar 15 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE

When Australia’s compulsory superannuation system was introduced in 1992, the name given to it, the superannuation guarantee, suggested that the payment of contributions by employers would be “guaranteed”. Reporting on compliance with superannuation guarantee by small-to-medium enterprises (SMEs), however, paints a vastly different picture — especially for small businesses. Also, the pseudo status of some small businesses as “contractors” (as opposed to employees) of larger businesses may be undermining their potential own entitlement to superannuation guarantee. Such non-compliance draws into question how certain the superannuation guarantee system is for employees of these enterprises, and thereby undermining this important pillar of Australia’s retirement system. Non-compliance by the SME sector is of concern given that it accounts for nearly 50% of private employment in Australia and performs important sub-contracting roles.

This article will examine data on the compliance by small business employers with their superannuation guarantee obligations that indicate this is far from the case. The article will examine the reasons behind non-compliance by small business employers and the related issue of non-recovery of outstanding entitlements by the Australian Taxation Office.

The article will then consider recommendations for reform of the current system to reduce the incidence of non-compliance by employers and to increase the likelihood of recovery of outstanding entitlements. The article will conclude by setting out areas worthy of further research and by arguing that reform is required to ensure that superannuation guarantee contributions are “guaranteed” for small business employees and operators.

Author profiles

Dr Brett Freudenberg CTA
Brett is a Professor – Taxation at Griffith University (Australia). Brett is known for his research expertise in the tax law and policy issues facing private enterprises, as evidenced by his Fulbright Scholarship (2006) and over 70 refereed publications in leading Australian and international journals. In 2020, he was awarded the national ATTA-Hill medal in recognition of outstanding contribution to Australasian tax policy and tax teaching. Professor Freudenberg’s research has analysed whether Australia should introduce a tax flow-through company, the tax treatment of discretionary trusts and the motivation for choice of business structure. His research has also considered the tax issues confronting private enterprises, reforms for enterprises in the arts sector, as well as to facilitate Islamic finance. Professor Freudenberg’s research has informed government policy as he was invited to present his PhD research findings to the Australian Treasury as part of the Henry Tax Review. Also his PhD was awarded the CCH-ATTA Doctoral Prize which saw it published as a book in 2011: Tax Flow-Through Companies. Brett is passionate about education being a transformative process, and his effectiveness as a teacher has been recognised through five national awards (including the award of two Australian Learning and Teaching Council citations: 2008 & 2011). - Current at 17 April 2020
Click here to expand/collapse more articles by Brett Freudenberg.
Scott Sargent
Scott works at Griffith University.
Current at 1 March 2015

 

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