Under the Superannuation Guarantee Amnesty, employers will have six months to report shortfalls

Christopher Heyes

27 February 2020

The eagerly awaited Superannuation Guarantee Amnesty Bill (Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019(“the Amnesty”)) has now been passed by both houses and is awaiting Royal Assent. The Amnesty applies to Superannuation Guarantee Charge (SGC) shortfalls arising prior to 1 April 2018 and will start from 24 May 2018, ending six months from the day after it receives Royal Assent.

Employers need to be proactive in accessing the Amnesty and contacting the ATO, as the Amnesty only applies where there is:

 - A voluntary disclosure by the employer, and;
 - You have not already been notified by the ATO they are conducting a SGC review for that period.

Employers who do not disclose their historical non-compliance during the Amnesty will face tougher penalties. This could include a minimum 100% penalty, with no ATO discretion to reduce it, for SGC shortfalls arising prior to 1 April 2018. Directors may also be personally liable where a company fails to meet its Superannuation Guarantee obligations.

The benefits of the Superannuation Guarantee Amnesty

Outside of the Amnesty, when a Superannuation Guarantee mistake is disclosed, an employer must pay a Superannuation Guarantee Charge (SGC). Normally, Superannuation Guarantee compliance is measured using Ordinary Time Earnings. But the SGC is calculated on all salary and wages of the employee for the period in question, which can include allowances, termination payments, lump sum payments and overtime. On top of this, the employer is also liable for interest, administration charges and penalties of up to 200%. These charges are not tax-deductible.

Under the Amnesty, employers will only be required to pay the Superannuation Guarantee shortfall and 10% interest charge. Other benefits of the Amnesty for employers will include:

 - Employers can claim tax deductions for payments of Superannuation Guarantee or contributions made during the Amnesty period to offset the Superannuation Guarantee Charge.
 - The administrative component of $20 per employee per quarter is waived.
 - The Part 7 penalty that may otherwise apply in relation to historical Superannuation Guarantee non-compliance is also waived.

It’s important to note the tax deduction for Superannuation Guarantee shortfalls under the Amnesty will only apply to payments made from 24 May 2018 until the six months expires.
Employers who are considering a payment plan with the ATO should be aware that outside this period, they will not receive a tax deduction for payments and any default for their payments can result in the reinstatement of penalties and administration fees.

Paying Superannuation Guarantee correctly

Superannuation Guarantee is an important part of our taxation system, but it can be very complex. It’s easy to make errors which could result in a Superannuation Guarantee shortfall and the consequences of this can be extensive and very expensive for employers.

Some important signs that might indicate you have a Superannuation Guarantee shortfall include:
 - Late payments of Superannuation Guarantee (i.e. later than the 28th day after the end of the relevant quarter).
 - Your accounting system (MYOB, Xero, QuickBooks, etc.) doesn’t automatically calculate Superannuation Guarantee on Ordinary Times Earnings items such as Non-Contingent Allowances, Annual Leave Loading or Standard Overtime.
 - An employee hasn’t provided their superannuation fund details so you haven’t made a Superannuation Guarantee payment on their behalf.
 - Engaging workers as contractors who may be deemed an “employee” for Superannuation Guarantee purposes.

Next Steps

If you are concerned about the status of your Superannuation Guarantee obligations, or you’re looking for some additional comfort that your Superannuation Guarantee obligations are being met, Crowe can undertake a Superannuation Guarantee Health Check for you.
During the health check, our advisers review your Superannuation Guarantee obligations and identify any indicators of errors or problems. If a Superannuation Guarantee shortfall (or indicators of such) is uncovered, they can assist with you with taking corrective action while taking advantage of the Superannuation Guarantee Amnesty benefits.

Contact our Tax Advisory team to undertake a Superannuation Guarantee Health Check today.