ATO gets tough with super dodgers

SBDC e-news – December 2016

The Australian Taxation Office (ATO) is cracking down on employers who are not meeting their superannuation commitments, for themselves or their employees.

Various ways of avoiding superannuation have been exposed by the ATO, with the incorrect classification of employees as contractors becoming a popular choice.

If you’re having trouble telling the difference between an independent contractor and an employee, a simple explanation is; an independent contractor normally uses their own equipment to complete the work, works to a specific project outcome and has a high level of control over how the job is done.

However, if the bulk of the work provided by the person is in the labour and not materials, then the person is more likely to be an employee and therefore is entitled to have superannuation paid on their behalf.

The minimum superannuation payable for an employee is 9.5 per cent of their ordinary time earnings, payable at least quarterly, via the ATO’s online Superstream system.

Our research shows that many small business operators have no plan in place for their own retirement, and will often pay superannuation contributions for their employees, but not themselves.

If you’re operating a business (but are not a sole trader), you must pay superannuation contributions for your employees and yourself. Failure to pay, or to pay on time, can result in hefty penalties including the original cost of the payments plus ten percent interest, plus an administration fee per employee, per quarter.

The ATO’s Small Business Superannuation Clearing House provides free online super payments to help eligible small businesses meet their super obligations.

Learn more about Superstream.