A recent analysis by Sydney University economist Dr Cameron Murray has suggested that the current compulsory Superannuation scheme has failed and should be dismantled.

Interestingly Dr Murray found that the superannuation sector employs 55,000 staff at a cost of $36bn per year compared with the Age Pension system which employs 7,000 staff at a cost of $1bn which provides greater levels of retirement income. For every $1m of benefits, super required 1.4 workers compared to 0.16 for the age pension!

Dr Murray concludes that the age pension system is twenty times more efficient at delivering retirement incomes.

“Scrapping the super system would massively improve Australia’s economic performance – it’s costly, inefficient, unnecessary and incredibly unfair” Dr Murray says.

“Instead of channelling incomes through asset markets, decreasing demand and soaking up a workforce the size of the military on an accounting exercise, the 28 million superannuation account holders could spend up to an additional $20,000 per year” Dr Murray said.

“This would make about $530 billion per year, or about 23% of GDP, available. Most people will not spend the maximum amount of their super account, but there is no doubting the stimulatory effect of this change for the real economy – something that is sorely needed as wages reach nearly a decade of stagnation,” he added.

Dr Murray also added “Otherwise intelligent people have been convinced that taking poor people’s money, to make them even poorer and giving it to expensive investment managers is a great solution.”

This is indeed an interesting study, particularly as the industry has been roundly criticized in recent times over excessive fees, insurance cover and its complexity. It is certainly not a report that the $3 trillion dollar industry will like, especially the industry controlled funds.

Rightly or wrongly this along with the Productivity Commission enquiry and the Hayne Royal Commission into the financial sector intensifies the need for a review and overhaul of the superannuation system. A final report, commissioned by the government into the Age Pension and superannuation system is due in mid 2020. No doubt this will make interesting reading.

For a business to ensure they’re meeting all of these obligations is incredibly challenging on their own and, in fact, there are a lot of businesses that aren’t meeting all of their obligations correctly even when they have advisors in place.

Operating a business in today’s environment requires compliance in a number of critical areas such as:-

Australian Taxation Office (ATO)

Superannuation Guarantee (SGC)

Australian Securities and Investment Commission (ASIC)

State Revenue Office (OSR)

Fair Work Australia (FWC)

Australian Competition & Consumer Commission (ACCC)

Department of Mines, Industry Regulation and Safety (DMIRS)

Office of the Australian Information Commissioner (OAIC)

Equal Opportunity Commission (EOC)

All business managers must be aware of the requirements of any of these agencies as failure to comply can lead to actions that result in various penalties from fines to incarceration.

In summary, the basic compliance requirements are as follows:-

ATO

Income Tax: All businesses must have accounting systems that comply with the Income Tax Act. This involves reporting on all income and expense of the business as per ATO reporting standards.

From a management point of view, one should remember that tax avoidance, i.e. only paying the amount of tax you are required to by law is not a crime however tax evasion or failing to declare taxable income is a crime.

GST: Similar to income tax all businesses with an income over the GST threshold of $75,000 must register for and comply with the GST Act.

Superannuation Guarantee: This is administered under the auspices of The ATO and requires employers to contribute a percentage, currently 9.5%, of an employee’s assessable income to their nominate superannuation fund.

ASIC: The Australian Securities and Investment Commissions’ charter or role, pursuant to The ASIC Act 2001, is as follows:-

• maintain, facilitate and improve the performance of the financial system and entities in it
• promote confident and informed participation by investors and consumers in the financial system
• administer the law effectively and with minimal procedural requirements
• receive, process and store, efficiently and quickly, the information we receive
• make information about companies and other bodies available to the public as soon as practicable
• take whatever action we can, and which is necessary, to enforce and give effect to the law.

ASIC is also responsible for such things as business registration and incorporation, annual solvency reporting, and oversight of insolvency practitioners and financial planners.

As can be seen, ASIC has an extremely wide charter and has powers similar to those of a royal commission to enforce or prosecute in accordance with The Act.

OSR: The Office of State Revenue is responsible for the administration and collection of duties such as payroll tax, stamp duties, and land tax.

Insofar as a business is concerned compliance with payroll tax is the principal concern. Currently, in WA the threshold requirement for payroll tax is $850,000 however this is being increased to $950,000 from the 1^st January 2020 and subsequently $1m from January 1, 2021.

Responsible management must ensure that they are aware of and are complying with any duties that may be payable.

FWC: The Fair Work Commission has oversight of The Fair Work Act 2009. In principle, this relates to ensuring compliance with the various awards that govern employee pay. At present, there are some 120 awards underpinning Australia’s payroll system.

The FWC also has powers to deal with other issues such as unfair dismissal claims, anti-bullying claims, and approving enterprise agreements.

Whilst there is some ambiguity in the interpretation of modern awards it is incumbent on management to seek advice to ensure that they are applying the correct award(s) to their employees.

ACCC: The Australian Competition and Consumer Commission has oversight of the Competition and Consumer Act 2010. Its charter is to promote competition amongst businesses, promote fair trading by business and protect consumers in their dealings with business.

In particular, managers involved in trading with consumers must make sure they comply with the act. (The act does not apply to commercial based trading).

DMIRS: The Department of Mines, Industry Regulation, and Safety is a state-based department in WA which regulates various industries including, building services, electrical, plumbing, real estate (property sales and rental). Its charter also includes environmental management and regulation, public and private labour regulations, consumer protection, and workplace safety regulation.

The issue of workplace safety is the area most managers need to be compliant with. There are serious penalties that apply where workplace safety is compromised or management is negligent in ensuring that safety standards are adhered to.

OAIC: The Office of the Australian Information Commissioner is responsible for enforcing The Privacy Act 1988 which applies to organisations with a turnover in excess of $3m as well as some specific organisations such as health services and credit reporting agencies.

In essence, the Act regulates the way in which personal information is handled. It allows individuals to know how their personal information is being collected and how it is being disseminated, ensures that corrections are made where there is an error in the information, and to stop receiving direct marketing paraphernalia.

Breaches of the act are subject to substantial fines so management must ensure that the recording and use of their client’s personal information are maintained in accordance with the act.

EOC:  The Equal Opportunity Commission has responsibility for encouraging recognition and understanding of the principles of equal opportunity and also to provide redress to individuals where unlawful discrimination has occurred.

All managers must ensure that in the general conduct of their business that they observe at all times the principles enunciated by the act.