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This memo was drafted by Lander & Rogers Lawyers on 25 January 2013.
Category: Professional Practice Compliance Sub-category: Superannuation

We have previously reported on the proposed changes which will require employers to provide regular information to employees about employer superannuation contributions. The passage of this proposed reform has been mildly tortuous, and it is easy to lose track of the correct current status.

In short, the initial reforms were anticipated to involve two stages and to be quite difficult from an employer perspective, but as a result of lobbying efforts there have been further developments which we think are positive for employers. In this article we bring you an update on employer superannuation contributions reporting.


Out with the old…

To re-cap, “Super Stream” is the broad-ranging suite of reforms designed to enhance the so-called “back office” of superannuation.

One of the objectives of Super Stream is to improve the information provided to each employee about their employer’s superannuation contributions. This was due to the government’s concern that employees do not always receive “good or timely information” about contributions made by their employers, and can therefore find it difficult to monitor whether their employer is complying with its superannuation contribution obligations.
To address this, the government initially proposed1 that:

• From 1 July 2012, employers would be required to report on payslips an “expected payment on or before date” for employer superannuation contributions, in addition to reporting an employee’s entitlements to superannuation which accrued during the pay period. This was apparently designed to be an ‘interim’ measure.
• Then, from 1 July 2013, employers would be required to report on payslips actual contributions paid, including the details of the fund to which the contributions were paid.

An exposure draft of the legislation to give effect to these proposals was released for comment in February 20122 although the detail was to be contained in regulations which were not released.
According to the explanatory materials, it was suggested that the first new requirement in particular would have a minimum compliance impact on employers – because it would only be a matter of software producers configuring systems to include an additional field on payslips for the expected date and employers filling it in. Right? Wrong! According to employers, this would have imposed a significant practical burden on them in terms of having to actually project the date that superannuation contributions would be paid.

It also raised questions about what the consequences would be of getting the date wrong since it was just a “plan to pay” date and whether, given the inherent uncertainty, this really addressed the government’s concern to ensure that employees receive good and timely information about their superannuation entitlements.

The legislation was then introduced into parliament in early March 20123, but actually without much change from the draft. The initial explanatory memorandum still indicated that the regulations would require reporting of the date on which employers expect to make their contributions for employees, although it was suggested that commencement of this requirement would be deferred (from 1 July 2012) to 1 January 2013.


In with the new…

In good news for employers, following a consultation process and recommendations by a parliamentary committee,4 the government subsequently announced some changes to the proposals. First, it decided to skip the interim stage of requiring reporting of “expected payment on or before dates” on payslips. Instead, it decided to simply require reporting of actual contributions on payslips paid, commencing from 1 July 2103.

On this basis, the legislation was passed.5
The content of the as-yet-unreleased regulations is still subject to further consultation because the government now admits that “extensive modification of payroll software” may be required to report actual contributions paid; and so, for employers, the uncertainty continues.

The government has said that the regulations will “probably” require employers to report superannuation contributions of “$0.00” on payslips where no contributions will be made in a pay period. There is some risk that this may be confusing for employees if it is not clear why no contributions are being made in that pay period. The revised explanatory memorandum to the new legislation suggests that:

“employers may wish to make a general statement on their payslips like: ‘Your superannuation contributions will be paid to your fund on or by the 28th day after the end of the quarter.”


Bottom line for employers

Employers will need to:

• Monitor developments on this issue to see where the government ultimately lands on the proposed changes, but should start getting prepared for the reporting on payslips of superannuation contributions which are actually paid in the pay period from 1 July 2013.
• Ensure that once the new requirements are finally known, systems and processes can accommodate them. The risk of non-compliance is that the Fair Work Ombudsman may become involved in enforcing the requirements, and civil remedy provisions under the Fair Work Act may apply.
• Consider how they will handle communications with employees about the new information being provided, for example to help employees understand why a zero contribution amount might be disclosed on some payslips.

Our Financial Services Team combines the right mix of legal skills, experience and a proactive and commercial approach to deliver clients the right results. We have experience guiding clients through almost all legal matters that can affect a participant in Australia’s superannuation industry. In particular, we offer specialist expertise advising employers on compliance with the Fair Work Act, Superannuation Guarantee (Administration) Act 1992, including application of ATO policy on ‘ordinary time earnings’, how to handle Superannuation Guarantee shortfalls and compliance with the ‘choice of fund’ regime, including interaction with industrial awards. For more information please contact Natalie Cambrell, Partner (03) 9269 9583 or Ruth Stringer, Partner (02) 8020 7661.


Disclaimer
This memo has been drafted by Lander & Rogers Lawyers to assist RCSA Members with a general understanding of the subject matter. This memo does not purport to be an exhaustive statement of all best practice requirements in the area. It is provided to RCSA Members as a guide only.

2 See exposure draft legislation and explanatory memorandum on Treasury website: http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2012/Payslip-reporting-of-superannuation-contributions .
3 The relevant provisions were contained within schedule 6 of the Tax Superannuation Law Amendment Bill (2012 Measures No. 1) Bill.
4 See Treasury paper “Superannuation: Payslip Reporting – Summary of Consultation Process” on the Treasury website, and the March 2102 advisory report from the House of Representatives Standing Committee on Economics on the Bill.
5 Tax Superannuation Law Amendment Bill (2012 Measures No. 1) Act, received Royal Assent 27 June 2012.