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What’s Trending: ATO reinforces focus on data integrity and debt collection for employer obligations

4 October 2024

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Following the Australian Taxation Office (ATO)’s FY24 commitment for a data-led focus on “superannuation guarantee integrity” and addressing “collectable debt”, and the ensuing investigative activity across many employers by the regulator, the ATO has once again reinforced its focus in these areas.

The Commissioner of Taxation (the Commissioner) recently highlighted that the ATO’s collectable debt predominantly comprises pay-as-you-go withholding (PAYG), goods and services tax and superannuation guarantee (SG). At the same time, two notifications were also released flagging a compliance drive on employer obligations, coupled with a separate release in relation to common superannuation errors identified by the regulator.

Data continues to be the genesis of ATO investigative activity, buttressed most recently in Treasury’s Payday Super fact sheet flagging proposed changes to Single Touch Payroll (STP) reporting to allow better “visibility (for) the ATO to proactively identify missing or late SG payments and intervene sooner”. This follows the ATO’s recent update to its Practice Statement PS LA 2007/10: Making default assessments in relation to SG, with a key addition being that the ATO will use STP data as an information source for making default SG assessments.

The ATO’s reinforced focus

In a recent speech, the Commissioner, Rob Heferen, provided his high level observations from his first six months in the role. Particularly relevant from an employer obligations perspective, the Commissioner noted that the ATO’s collectable debt is now the “largest it has ever been”, predominantly comprising PAYG (that has either been not remitted or incorrectly remitted), and “even more worryingly”, employee superannuation entitlements.

These comments come on the back of the ATO’s FY25 Corporate Plan noting that an “increased focus on business debt including SG, PAYG and goods and services tax” is a key focus area for the year. The Plan noted the ATO’s investment in “enhanced data and improved analytics capability” as a key investigative lever. In his aforementioned speech, the Commissioner fortified this, providing that the ATO will be “firmer and faster” in addressing collectable debt “using data and industry insights to improve detection and prevention strategies”.

Concurrently, the ATO released two notifications via its website, one addressed to businesses and the other to tax professionals, flagging a compliance drive where employers showing “early or ongoing signs of non-compliance” with PAYG, SG and/or FBT obligations may be contacted. The notifications also provide that if there has been unresponsiveness or ongoing patterns, the ATO may progress to “a review or audit to assess their situation”.

Separately, the ATO published common SG errors that it has identified, underlining again the data-led focus that allows the regulator to flag issues. The three common errors noted by the ATO are:

Rejected superannuation payments: Employers are not addressing rejected contributions on a timely basis, where often rejections are due to erroneous employee details (e.g. an incorrect Tax File Number). This data mismatch becomes visible to the ATO by comparing employer STP reporting to super fund reporting. The regulator flagged the necessity for employers to build stronger governance in relation to rejected contributions, including potential utility of the “default super fund” to mitigate non-compliance risk.
Incorrect SG calculations: Errors in relation to SG calculations, either in relation to determining what constitutes ordinary time earnings, or in applying the incorrect rate (currently 11.5%). Such miscalculations have become clearer in particular as a result of STP - phase 2 reporting.
Late payments: Timely payment to a clearing house is not necessarily timely payment of SG - dependent on a clearing house’s arrangements with an employer, payment to a clearing house may not allow sufficient time for the funds to be received into employees’ accounts by the payment deadline. Again, this has become more visible to the ATO through data mining between employer versus fund reporting.

What does this mean for you?

The ATO’s recent focus on employer obligations, based on an ongoing investment in data analytics, continues to evolve - and this will further migrate as we approach the start of Payday Super, with the fact sheet noting that the regime will allow the ATO to better match “STP data and superannuation fund reporting” to “proactively intervene sooner”.

Whilst Payday Super is still a while away (proposed start date of 1 July 2026), it is clear that the regulator remains focused on closing the gap on non-compliance, including remittance of debts. The flagging of a compliance drive, including “review or audit”, highlights the necessity for employers to proactively and critically assess their governance. The common SG errors noted above allows for immediate areas of focus in the payroll space, which include:

Payroll configurations for both superannuation calculations and PAYG, as well as ensuring alignment for STP reporting purposes (to mitigate inadvertent “red flags”);
Understanding the terms and conditions employers have with their clearing house providers, which in turn impacts an organisation's governance in relation to the remittance cycle to enable compliance (including catering for bounce-backs); and
Timely data validation testing of payroll system outputs for superannuation, PAYG and against STP lodgments, to proactively identify and remediate non-compliance or data exceptions before these are flagged or identified by the ATO.

Should you have any questions regarding the ATO’s increasing focus on using data when it comes to regulating employer obligations, or want to further discuss your organisation’s existing employer obligations governance arrangements, please contact a member of our PwC team of specialists.