One-off Super Guarantee Amnesty
Employers that have fallen behind with their superannuation guarantee (SG) obligations will have 12 months to "self-correct" under a new amnesty should it pass through Parliament.
Businesses are required to remit super guarantee payments on behalf of their employees, however the ATO estimates that $2.85 billion is currently owned in late or missing payments. It is now running a 12 month amnesty to encourage employers to reduce the SG gap by providing relief from the punitive penalties that usually apply to late payments.
Even if you believe you're on top of your SG payments, it's worth undertaking a payroll audit to ensure that your calculations are correct and that employees are being paid consistent with their entitlements under workforce laws and awards.
The amnesty applies to employers that have underpaid or not paid SG for any period from 1 July 1992 up to 31 March 2018.
To qualify for the amnesty, employers must disclose the outstanding SG to the Tax Commissioner using the SG Amnesty ATO payment form or the SG Amnesty Fund payment form where the payment has been made directly to the employee's fund. You either pay the full amount owing or if the business cannot pay the full amount, enter into a payment plan with the ATO. If you agree to a payment plan and do not meet the payments, the amnesty will no longer apply.
Bear in mind that the amnesty only applies to "voluntary" disclosures. The ATO will continue its compliance activities during the amnesty period so if they discover the underpayment first, full penalties apply. The amnesty also does not apply to amounts that have already been identified as owing or where the employer is subject to an ATO audit.
Normally, if an employer fails to meet their quarterly SG payment on time they need to pay the SG charge (SGC) and lodge a Superannuation Guarantee Statement. The SGC applies even if you pay the outstanding SG soon after the deadline.
- The SGC comprised of:
- The outstanding SG entitlements (although this component might be higher than what it would have been had the entitlements been paid on time)
- Interest of 10% per annum, and
- An administration fee of $20 for each employee with a shortfall per quarters
- Penalties of up to 200% of the amount of the underlying SG charge
- A general interest charge if the SGC or penalties are not paid by the due date
The SGC amount is not deductible - even if you pay the outstanding amount. If you pay SG late, you can no longer deduct the SG amount even if you bring the payment up to date.
Under the quarterly superannuation guarantee, the interest component is calculated on an employer's quarterly shortfall amount from the first day of the relevant quarter to the date when the SG charge would be payable (not from the date the SG was overdue).
Under the amnesty, employers pay:
- The SGC:
- The outstanding SG entitlement
- Interest of 10% per annum
- No administration fees
- No penalties
- A general interest charge
An extra benefit of using the amnesty period to catch up is that the SGC amount is deductible. The ability to deduct SGC and the reduction in penalties could be significant for employers that have fallen behind with their SG obligations.
Special provisions exist within the legislation to automatically protect employees from inadvertently breaching concessional contribution cap limits if the unpaid SG is paid to the Commissioner and then transferred to the employee's superannuation fund.
Where the employer makes the payment directly into the employee's fund, the individual would need to apply to the Commissioner requesting the exercise of discretion to either disregard the concessional contributions or allocate them to another financial year.
Legislation enabling the amnesty is currently before Parliament, however as Parliament is adjourned, it's unclear when the legislation may pass.
Nevertheless, if your business has fallen behind on its SG obligations and ultimately becomes eligible for the amnesty, you need to start working through the issues now or contact us to work through the issues for you. There are several calculations that need to be completed and these may take some time to be produced.
If your business has engaged any contractors during the period covered by the amnesty, then the arrangements will need to be reviewed as it is common for workers to be classified as employees under the SG provisions even if the parties have agreed that the worker should be treated as a contractor. You cannot contract out of SG obligations.
If you have not undertaken a payroll audit or an audit of rates paid to employees, you should do this within the next 12 months.
Speak to your accountant for additional guidance by calling us on 02 9957 4033.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.