On 12 February 2019, the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 was passed in Parliament, introducing a number of laws designed to improve the integrity of the Superannuation Guarantee system and pay as you go (PAYG) withholding tax compliance. Of the changes, the most significant include new penalties for employers who fail to comply with their superannuation obligations.

The new bill will enable the ATO to direct employers to pay Superannuation Guarantee and will make failure to comply a crime punishable by a fine or up to 12 months jail time.

Assistant Treasurer Stuart Robert has labelled the legislation the “most comprehensive action any Government has taken to address non-compliance with superannuation guarantee law since its introduction in 1992.” He warned that “employers should know that the ATO will be able to closely monitor superannuation compliance and employers will face severe consequences for ripping off their workers.”

However, the bill has not been without criticism, with the Tax Institute declaring the measure unviable and instead asserting that changes to Super Guarantee rules should be prioritised over the imposition of jail sentences. It is submitted that seeking to punish offenders with jail time for not paying a tax debt is an unnecessary overreach and sets a dangerous precedent for further changes to tax collection that will no doubt include jail time for other failures to pay tax debt.  Where will it end?  Will jail or the prospect of jail act as a deterrent?  Do we want to fill jails with employees who struggle or fail to pay certain bills?

This Bill seems to stand in stark contrast to the Government’s recent proposal designed to encourage entrepreneurs to start new businesses, such as the proposal to reduce the standard personal bankruptcy term from 3 years to 1 year.

The proposed jail time for failure to pay the Superannuation Guarantee is a step too far and may well discourage investment in new businesses.