House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 6 Superannuation - payslip reporting

Outline of chapter

6.1 Schedule 6 to this Bill amends the Superannuation Industry (Supervision) Act 1993 (SIS Act) to require employers to report, on payslips, any information prescribed in the regulations about superannuation contributions.

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The regulations will in turn require employers to report the amount of superannuation contributions, as well as the date on which the employer expects to pay them. The regulations will be enacted once this Bill has come into force.

Context of amendments

6.2 Some employers fail to pay their employees' superannuation entitlements. According to the Inspector-General of Taxation, the employees worst affected tend to be low-income, casual or part-time workers. The payslip reporting measure, which forms part of the Securing Super package, will provide greater protection for these vulnerable workers.

6.3 At present employers are required to report (on payslips) either entitlements to superannuation accrued during the pay-period, or actual contributions.

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Section 536 of the Fair Work Act 2009 (Fair Work Act) currently provides for payslip reporting and for the making of regulations about payslip reporting, while section 796 contains a broad, regulation making power. Regulation 3.46 in the Fair Work Regulations 2009 (Fair Work Regulations) sets out what specifically must be reported on a payslip.

6.4 This means that at present employees may not be able to tell from their payslips whether their superannuation contributions have already been made, or when they will be made. While employers need to report accrued entitlements to superannuation guarantee (SG) contributions on payslips, they do not actually need to make SG contributions until 28 days after the end of the quarter concerned. Employees may be misled by the payslip into thinking that the contribution has actually been paid.

6.5 This Schedule is designed to require employers to report the date on which they expect to make their contribution. This will improve employer compliance since employers will be making a public and checkable statement on their payslips. This Schedule will also improve the timeliness of information by telling employees when they can check with their fund that their employer has made the contribution.

6.6 This Schedule forms part of the Securing Super package, announced as an election commitment during the 2010 election campaign. Within the same package, the Government will also legislate to require Australian Prudential Regulation Authority regulated superannuation funds and retirement savings account (RSA) providers either:

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to notify members that they have either received or not received contributions during the quarter, and maintain a web-based portal for members to consult. This would apply to members with active accounts, and would require quarterly, electronic notification; or

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to issue six-monthly notices to members, with active accounts, which show contributions made.

Fund notification will complement this measure, since it will provide employees with both the opportunity and the means of checking that their employer has made the required contribution.

6.7 This Schedule will require some modification of payroll software, while the proposed reporting of actual contributions may require more extensive modification

6.8 This measure was announced in slightly different form in the 2011-12 Budget and during the 2010 election. As originally announced, employers would have been required to report superannuation contributions, on payslips, when they were actually made during the pay period. This would have been in addition to the current requirement for them to report accrued entitlements for the pay period concerned.

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The Stronger Super Consultation Panel was concerned that, under the original proposal, employers would have required software changes which are potentially considerably more expensive than those needed for the present measure. The Government is consulting further on this question, and has announced that from 1 July 2013, subject to there being no significant payroll system costs, payslip reporting of actual contributions paid rather than just accrued contributions will commence.

6.9 While the current payslip reporting requirements are in the Fair Work Act and the Fair Work Regulations, they do not apply to:

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public sector employers in a number of states (New South Wales, Queensland, Western Australia, Tasmania and South Australia); and

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some (unincorporated) private sector employers in Western Australia.

6.10 For this reason the new requirements will go into the SIS Act.

Summary of new law

6.11 This Schedule will require employers to report, on payslips, any information prescribed in the regulations about superannuation contributions.

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The regulations will in turn require employers to report the amount of superannuation contributions and the date on which the employer expects to pay them. This will be the date on which the employer transmitted the contribution, not the date on which the fund credited the employee's account.

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The regulations will apply to all kinds of superannuation contribution processed by the employer, including:

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SG contributions;

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contributions made under industrial instruments; and

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salary sacrifice and voluntary employee contributions.

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At present, employers are required to report accrued superannuation contributions under the Fair Work Regulations. These requirements will be transferred to the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations), along with the new 'expected date' requirement. The Fair Work Regulations will contain a note pointing to the new SIS Regulations.

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There will be no new penalty for failing to make the contribution on the date nominated, though employers who fail to do so can expect to deal with enquiries from their employees. Employers may still be liable for penalty under other provisions (for instance, for failing to meet the requirements of the Superannuation Guarantee (Administration) Act 1992 ).

Comparison of key features of new law and current law

Detailed explanation of new law

6.12 Section 1 of this Schedule enlarges the object of the SIS Act, to make it clear that the Act can regulate employers when they issue payslips. It does this by amending subsection 3(1) of the SIS Act.

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It is worth noting that subsection 3(3) of the SIS Act says that the '...Act does not regulate other entities engaged in the superannuation industry'. However, this means that the SIS Act does not regulate unregulated superannuation funds. It is not meant to prevent the regulation of employers when they interact with regulated superannuation funds (and section 64 of the SIS Act already does so, requiring employers to remit deductions from salary and wages promptly). Employers are not, in this sense, 'entities engaged in the superannuation industry' since they do not themselves act as superannuation funds or RSAs. [ Schedule 6, item 1 ]

6.13 Section 2 of this Schedule inserts a new Part into the Summary of Provisions in section 4 of the SIS Act. [ Schedule 6, item 2 ]

6.14 Section 3 of this Schedule makes the Fair Work Ombudsman responsible for administering the new payslip provisions (by amending subsection 6(1) of the SIS Act).

6.15 Sections 4 to 6 of this Schedule add new terms to the definitions given in section 10 of the SIS Act. In particular, they give the term 'Fair Work Inspector' the meaning it has in the Fair Work Act, the term 'industrial instrument' the meaning it has in the Income Tax Assessment Act 1997 , and the term 'salary or wages' the meaning it has in the Superannuation Guarantee (Administration) Act 1992 . [ Schedule 6, items 3 to 5 ]

6.16 Section 7 repeals the existing definition of salary or wages in subsection 64(4) of the SIS Act, because the definition is now grouped with the other definitions in section 10 of that Act. [ Schedule 6, item 6 ]

6.17 Section 8 is the substantive amendment, and establishes a power within the SIS Act to create the regulations which will specify how employers must report superannuation contributions. Section 7 introduces a new Part (Part 29B) with a number of new sections into the SIS Act. [ Schedule 6, item7 ]

6.18 New section 336J sets out the object of the Part, which is 'to require employers to regularly give information about the superannuation contributions they have made or will make for the benefit of their employees'.

6.19 New subsection 336JA(1) imposes the new requirements on employers if they are otherwise required to issue payslips (under an industrial instrument) and if they 'can' make a contribution to a superannuation fund on behalf of the employee concerned. The word 'can' is used because the measure extends beyond those employers who are obliged to make superannuation contributions, for instance by an industrial agreement, and includes those employers who choose to make contributions.

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Technically, employers are not obliged to make SG contributions but are subject to the SG charge. However, employers can choose to reduce the SG charge by making tax deductible contributions into their employees' superannuation funds. Most employers choose to do this because the SG charge is not tax deductible. This Schedule therefore uses the word 'can' so as to require employers who choose to make contributions to report these on payslips.

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The regulations will probably require employers who plan to pay the SG charge to report a contribution of $0 and an expected date of 'n.a.' (not applicable). This will alert employees.

6.20 New paragraph 336JA(1)(d) excludes cases where employees are members of defined benefit funds (where in many cases contributions during the employee's working life are merely nominal). However, employers are still required to report contributions into the accumulation part of hybrid funds (those funds which contain both defined benefit and accumulation elements).

6.21 New subsection 336JA(2) requires the affected employers to include on their payslips any information required under the regulations.

6.22 New section 336JB has the effect of treating the requirement in subsection 336JA(2) as if it were a civil remedy provision under the Fair Work Act, despite the fact that the provision is located in the SIS Act. The effect of this provision is to allow Fair Work Inspectors to use compliance and enforcement provisions equivalent to those in Chapter 4 of the Fair Work Act for the new measure.

6.23 New section 336JC gives the new Part in the SIS Act the same geographic coverage as that set out in the Fair Work Act. This means that Fair Work Inspectors will have authority within the same geographic area as they usually do under the Fair Work Act.

6.24 New subsection 336JD(1) sets out the Fair Work Ombudsman's functions in respect of the new provision, including promoting compliance, monitoring and investigating, commencing proceedings in a court and representing employees in court.

6.25 Subsections (2) and (3) allow Fair Work Inspectors to use their usual powers under the Fair Work Act when enforcing the payslip provisions in new Part 29B of the SIS Act.

6.26 Because the compliance and enforcement provisions are based on those in the Fair Work Act, subsection (4) makes a number of the existing provisions in the SIS Act inapplicable. These include the powers conveyed by:

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Part 25 of the SIS Act ( Monitoring and Investigating Superannuation Entities );

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Part 26 ( Offences Relating to Statements, Records, etc );

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Part 27 ( Powers of Court ); and

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Part 28 ( Proceedings ).

6.27 New section 336JE allows Fair Work Inspectors to disclose information which they acquire when administering payslips, to the Minister responsible for the SIS Act and his or her Department. This extends the current powers of Fair Work Inspectors to disclose information to the Minister responsible for the Fair Work Act and his or her Department, as set out in section 718 of the Fair Work Act.

6.28 New section 336JF sets out an alternative constitutional basis for this measure.

Application and transitional provisions

6.29 Section 9 applies the payslip reporting provisions to salary or wages paid on or after commencement; that is, from a day to be fixed by Proclamation. This is likely to be 1 January 2013. In the absence of a proclamation, this Schedule will commence 12 months after Royal Assent. The 12-month period has been chosen to give software providers more than six-months' notice, so that they can update their software in time. [ Schedule 6, item 9 ]

6.30 Sections 10 and 11 supply missing cross references in the Summary of Provisions in section 4 of the SIS Act. [ Schedule 6, items 10 and 11 ]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Superannuation - payslip reporting

6.31 This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview of the Schedule

6.32 This Schedule will require most employers, when reporting superannuation contribution entitlements on payslips, to state the day by which the employers intends to make the contribution.

Human rights implications

6.33 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

6.34 This Schedule is compatible with human rights as it does not raise any human rights issues.

Minister for Superannuation, the Hon Bill Shorten