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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:

Scott Sargent
Scott works at Griffith University.
Current at 1 March 2015

 
Author Photo - Brett Freudenberg CTA
Dr Brett Freudenberg CTA
Brett works at the Department of Accounting, Finance and Economics, Griffith Business School, Griffith University. In addition to his taxation teaching, Brett was awarded a PhD for his research into tax transparent companies in the US, the UK and New Zealand, and how Australian closely held businesses may benefit from their introduction. In 2009 Brett was invited to present his PhD research findings to the Australian Treasury as part of the Henry Tax Review. In 2006 Brett received a Fulbright Award, which saw him conducting research at the University of Illinois to analyse the proliferation of new business forms in the United States and their potential application for Australian businesses. Brett has published refereed articles in leading Australian and international tax journals. In addition to his tax expertise, Brett has received a number of teaching accolades, including in 2008 a national teaching citation from the Australian Learning & Teaching Council for his outstanding contributions to student learning. Current at 01 July 2016 Click here to expand/collapse more articles by Brett FREUDENBERG.
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