Explanatory Statement
Issued by authority of the Assistant TreasurerSuperannuation Guarantee (Administration) Act 1992
Superannuation Guarantee (Administration) Amendment Regulations 2001 (No. 3)
Section 80 of the Superannuation Guarantee (Administration) Act 1992 (the Act) provides that the Governor-General may make regulations prescribing all matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act.
The Act imposes a potential liability to the Superannuation Guarantee Charge on all employers including non-resident employer's who have employees working in Australia. Under the Act and related provisions, all employers are required to provide a prescribed minimum level of superannuation support in each financial year for each employee. An employer that does not make a minimum level of superannuation contributions into a complying fund on behalf of his employees is required to pay the Superannuation Guarantee Charge. There are a number of exclusions to this requirement which are prescribed in the Superannuation Guarantee (Administration) Regulations.
The purpose of these Regulations is to prescribe a further exclusion to the requirement to pay the Superannuation Guarantee Charge to address the problem of 'double coverage'.
Double coverage can arise where an employee is sent to work temporarily in another country and the employer is required to make superannuation contributions under the legislation of both countries. The (Government has decided to enter into international agreements with other countries to overcome the problem of double superannuation coverage. Under these international agreements it is intended that only the home country's superannuation scheme will apply.
For example, a foreign employer who sends a foreign employee to work temporarily in Australia would be exempt from the Superannuation Guarantee in respect of salary or wages paid to the employee for their work in Australia but will remain subject to the superannuation scheme of their home country. Similarly, an Australian employer who sends an Australian employee to work temporarily in the other country will be exempt from the other country's superannuation scheme but will remain subject to the Superannuation Guarantee.
The amending Regulations achieve the objective of removing Superannuation Guarantee obligations from an overseas employer in respect of an employee sent to work temporarily in Australia (provided this is in accordance with the terms of a relevant international agreement dealing with double coverage). Consequently, the amendment removes the double coverage obligation on the employer.
The amending Regulations are described in the attachment. A Regulation Impact Statement is also attached.
The amending Regulations commence on 1 January 2002. This date will coincide with the expected commencement of the first bilateral Social Security Agreement dealing with double coverage.
Superannuation Guarantee (Administration) Amending Regulations 2001 (No. 3)
Regulation 1 - specifies the name of the Regulations as the Superannuation Guarantee (Administration) Amendment Regulations 2001 (No. 3).
Regulation 2 - provides that the Regulations commence on 1 January 2002.
Regulation 3 - provides that Schedule 1 amends the Superannuation Guarantee (Administration) Regulations 1993.
Schedule 1 amendments
Item 1 of Schedule 1 adds a new definition in existing Regulation 2 - a new definition of 'scheduled international social security agreement' is inserted for the purposes of new Regulation 7AB.
Item 2 of Schedule 1 - inserts a new Regulation 7AB which provides for an additional exclusion from the Superannuation Guarantee Scheme of salary or wages paid to an employee where a 'scheduled international social security agreement' (refer to section 5 of the Social Security (International) Agreements Act 1999) provides that the employer is not subject to the Superannuation Guarantee Act in respect of the work for which the payment was made.
This achieves the objective of removing Superannuation Guarantee obligations from an overseas employer in respect of an employee sent temporarily to work in Australia (provided this is in accordance with the terms of a relevant international agreement dealing with double coverage). Consequently, the amendment removes the double coverage obligation on the employer.
Regulation impact statement
Exemption from the Superannuation Guarantee to remove double coverage
The policy objective is to remove 'double coverage' obligations that can arise under superannuation legislation where an employee is sent to work temporarily in another country.
The Government has decided to enter into international agreements with other countries to overcome the problem of double superannuation coverage. Double coverage can arise where an employee is sent to work temporarily in another country and the employer is required to make superannuation contributions under the legislation of both countries. Under these international agreements it is intended that only the home country's superannuation scheme will apply.
For example, a foreign employer who sends a foreign employee to work temporarily in Australia would be exempted from the Superannuation Guarantee in respect of salary or wages paid to the employee for their work in Australia but will remain subject to the superannuation scheme of their home country. Similarly, an Australian employer who sends an Australian employee to work temporarily in the other country will be exempted from the other country's superannuation scheme but will remain subject to the Superannuation Guarantee.
Only one option is being considered. This involves amending the Superannuation Guarantee (Administration) Regulations to provide that payment of salary or wages to an employee will not give rise to a Superannuation Guarantee obligation where an international social security agreement provides that the employer is not subject to the Superannuation Guarantee legislation in respect of the work for which the payment was made (on the basis that their home country legislation continues to apply).
Assessment of impacts (costs and benefits)
Employers from a country which has an appropriate agreement with Australia, and who send employees to work temporarily in Australia, will benefit from a reduction in labour costs due to no longer being required to pay the Superannuation Guarantee.
Reciprocal benefits for Australian employers will arise where the employer sends an Australian employee to work temporarily in another country with which an agreement is in place. In these cases, the employer will only be required to make Superannuation Guarantee contributions and not contributions under the other country's legislation.
While employers will be required to determine if they are eligible for the new exemption, this is a self-assessment process and consistent with existing practices. There are no significant compliance costs expected for employers.
Employees will no longer have contributions made for them under the legislation of both countries, however they will remain appropriately covered under the legislation of their home country (where they are likely to retire).
Where a foreign employer is exempted from Superannuation Guarantee under these Regulations (and in accordance with an international agreement), this will result in less Superannuation Guarantee contributions being made than would otherwise have been the case. Accordingly, the 15% tax normally levied on those contributions will also not be collected. The impact on Government revenue cannot be quantified (as it would depend on the particular countries that become party to the agreements) but is expected to be small.
The reduction in labour costs for these employers may have some impact in promoting investment in Australia, though this cannot be quantified.
Groups representing employers and the superannuation industry have been consulted on the proposed agreements and have not expressed any concerns.
Provisions for avoiding double superannuation coverage are common practice amongst most industrialised countries.
Such provisions ensure that employers do not have to make 2 amounts of contributions for an employee's retirement in respect of the same work undertaken by the employee.
The amendment to the Regulations will achieve the objective of removing Superannuation Guarantee obligations from an overseas employer in respect of an employee sent to work temporarily in Australia (provided this is appropriately provided for in an international agreement). Consequently, the amendment will re move the double coverage obligation on the employer.