The Government has resurrected the Superannuation Guarantee amnesty giving those employers that have fallen behind with their Superannuation Guarantee obligations the ability to self-correct themselves. However, this time the amnesty incentive is strengthened by harsher penalties for those that fail to take action.
The amnesty was originally announced back in May 2018 and was due to run 24 May 2018 – 23 May 2019, but the amnesty failed to secure passage through Parliament after a backlash from those thought that the amnesty was too lenient on recalcitrant employers.
The Australian Government reports more than 7,000 employers have come forward since the original announcement to voluntarily disclose historical unpaid super. The Superannuation Guarantee tax gap is estimated at around $2.85 billion in missing or late Superannuation Guarantee payments.
When does the amnesty apply?
New legislation to enable the amnesty is currently before Parliament, if enacted it will apply from the date of the original amnesty announcement 24 May 2018 – 6 months after the legislation has passed Parliament. Employers have this time period to disclose voluntarily unpaid or underpaid Superannuation Guarantee payments to the Commissioner of Taxation.
The amnesty applies to historical unpaid or underpaid Superannuation Guarantee for all periods up to March 2018 quarter.
Qualifying for the amnesty
Employers must disclose the outstanding Superannuation Guarantee to the Tax Commissioner to qualify for the amnesty. They must pay in full, or if that is not possible for the business then it must enter into a payment plan agreement with the Australian Taxation Office. If they agree to the payment plan and fail to meet the payments, then the amnesty will not apply.
The amnesty will only apply to voluntary disclosures. The Australian Taxation Office will continue with their compliance activities during the Superannuation Guarantee amnesty period so full penalties will apply if they find the underpayment first. The amnesty also does not include amounts already identified as owing or the employer is subject to an audit with Australian Taxation Office.
What do employers pay under the amnesty?
Normally, if the employer fails to meet their quarterly Superannuation Guarantee payment on time, they will have to pay the Superannuation Guarantee charge and lodge a Superannuation Guarantee Statement. The Superannuation Guarantee charge applies even if you pay the outstanding Superannuation Guarantee soon after the deadline.
|What employers pay for failing to meet Superannuation Guarantee obligations|
|Superannuation Guarantee charge comprised of:||Superannuation Guarantee charge comprised of:|
|Penalties of up to 200% of the amount of the underlying Superannuation Guarantee charge (minimum 100% for quarters covered by the amnesty)||No penalties|
|A general interest charge if the Superannuation Guarantee or penalties are not paid by the due date||A general interest charge
|Superannuation Guarantee charge amount is not deductible – even if you pay the outstanding amount||Superannuation Guarantee charge amount is deductible|
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 Superannuation Guarantee charge would be payable (not from the date the Superannuation Guarantee was overdue).
The ability to deduct Superannuation Guarantee charge and the reduction in penalties under the amnesty could be significant for employers that have fallen behind with their Superannuation Guarantee obligations.
If Superannuation Guarantee is paid late, special provisions exist within the legislation to automatically protect employees from inadvertently breaching concessional contribution cap limits if the unpaid Superannuation Guarantee 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.
What happens if you do not take advantage of the amnesty?
If an employer fails to take advantage of the amnesty and is found to have underpaid employee Superannuation Guarantee, they are required to pay the Superannuation Guarantee charge which includes penalties of up to 200%. Outside of the amnesty period, the Australian Taxation Office has the power to reduce the penalty in whole or part. However, the legislation enabling the amnesty imposes tougher penalties on employers that do not voluntarily correct unpaid or underpaid Superannuation Guarantee by removing the Australian Taxation Office’s capacity to reduce these penalties below 100%. In effect, the Commissioner loses the power for leniency even in cases where an employer has made a genuine mistake.
Where to from here?
Even if you don’t think that your business has any Superannuation Guarantee underpayment issues, it is well worth completing a payroll audit that will ensure your payroll calculations are correct, and that your employees are being paid at a consistent rate as per their entitlements under workplace awards and laws.
If your business has fallen behind on its Superannuation Guarantee obligations and is 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 completing and these may take some time to complete.
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 Superannuation Guarantee provisions even if the parties have agreed that the worker should be treated as a contractor. You cannot contract out of Superannuation Guarantee obligations.
If a problem is revealed, you can correct it without excessive penalties applying under the amnesty.
At Accorti Accountants we can help you ensure you have met your obligations and, in the event you have not, help to resolve.
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