Industry super funds have accused the Abbott government of quietly watering down penalties designed to encourage employers to pay their workers' super on time.
The proposed changes are being portrayed by the government as "reducing the severity" of current fines on businesses, particularly small companies, that are behind on super contributions.
Draft legislation that proposes reducing the financial penalty for business owners who fail to report a late or non-payment of their employees' super contributions was released without any fanfare last Friday.
It comes days after Treasury and the Australian Tax Office began canvassing support from industry and consumer stakeholders for an amnesty on unpaid super to encourage employers to pay up.
It is estimated that 650,000 Australians are currently out of pocket on employer super from their bosses, with a report earlier in the year estimating the value of outstanding contributions at $2.5 billion.
Small Business Minister Bruce Billson said the current penalties are too high and may dissuade some business owners from reporting a late payment.
A smaller penalty would "right-size" the penalty to the act of non-payment, and encourage businesses to self-report if they did miss a payment.
His proposal has been welcomed by the Council of Small Business Australia (COSBOA) but Labor and some industry super funds have slammed it, describing the proposed changes as "incredibly concerning".
Mr Billson told Fairfax Media: "The penalty regime used to be extraordinarily disproportionate to the non-payment by the employer."
"If the costs become so substantial that it risks having such a huge impact on the financial viability on your business then you may well think that the better outcome is not to fess up that you've made an error.
"We want to see non-payments remedied as quickly as possible, and having a disproportionate penalty adds nothing to that goal."
Under the current rules, employers who fail to pay super are required to lodge a "superannuation guarantee charge" and to pay a fine equal to the contribution, plus 10 per cent interest a year.
Failure to lodge an SGC can result in the penalty being doubled and there are fines of up to $5400 for bosses who don't keep adequate super records.
Peter Strong, chief executive of COSBOA welcomed the draft legislation, saying the focus needs to shift from fining small businesses to helping them make payments on time and encouraging them it to report late payments.
But industry super fund Cbus said the changes have been pitched as small business reform but "make no attempt to discern small business from any other employer".
Cbus chief executive David Atkin said: "This problem is getting bigger and is having an increasing impact on workers' superannuation balances and, therefore, on government revenues. Reducing penalties for employers who fail to obey the law is simply heading in the wrong direction.
"Superannuation is the deferred wages of employees. It's not a cash flow component of a business. In fact, the majority of employers want to know that every other business is doing the right thing and paying super on time so that an equal playing field is maintained.
"The current SGC is designed to impose a real incentive for employers to pay superannuation on time. If anything its penalties for non-compliance should be strengthened to address the burgeoning non-compliance issue, not watered down."
Labor's Bernie Ripoll said the Opposition was willing to consult on the idea of reduced penalties but said "no one trusts Tony Abbott or his Government when it comes to superannuation".
"Tony Abbott famously called compulsory superannuation 'one of the greatest con jobs ever foisted on the Australian people' – he has always hated superannuation, which is why Australians are always deeply sceptical when his Government wants to make changes.
"If these changes reduce the penalties for businesses who rip their workers off by not paying their superannuation, then that's incredibly concerning."
