03 Apr 2020

The clock is ticking: ATO runs a short amnesty for unpaid superannuation guarantee payments, and then harsher penalties

By Amber Agustin

Employers, including those who pay above the SGC rates, should undertake a full legal review of superannuation compliance to identify any current or historical non-compliance.

Employers have until 7 September 2020 to self-report to the ATO and backpay any superannuation guarantee shortfall, or they will face harsher penalties under new legislation.

The long-awaited superannuation guarantee (SG) amnesty (SG Amnesty) was finally passed by Parliament and received Royal Asset on 6 March 2020. The SG Amnesty provides a one-off temporary amnesty to incentivise eligible employers to come forward and disclose underpaid superannuation guarantee amounts to the Australian Tax Office (ATO). It achieves this by using both a carrot and a stick approach.

A more detailed guide to taking up the SG Amnesty is found in our process guide.

The carrot and stick

The carrot is allowing eligible employers to disclose and pay unpaid super guarantee charge (SGC), including nominal interest, without being liable for the administration fee component of the SGC or the Part 7 penalty. Employers will also be able to claim a tax deduction for the SGC (normally not deductible). Employers have until 7 September 2020 to self-report to the ATO and backpay any superannuation guarantee shortfall.

The stick will be used for employers who could have qualified for the SG Amnesty but do not voluntarily disclose their non-compliance. In this case, employers will not only be liable for nominal interest and the administration component, but will also face a mandatory penalty of at least 100% of the SGC under Part 7, effectively doubling their liability, unless there are exceptional circumstances. Employers will not get a tax deduction for any amount.

Eligibility and reporting

An employer will be eligible for the SG Amnesty if they need to make a voluntary disclosure to the ATO within the amnesty period (between 24 May 2018 and 6 September 2020), and have not previously been under ATO investigation in respect of superannuation obligations for the relevant quarter.

The SG Amnesty applies to quarters from 1 July 1992, until the quarter ending 31 March 2018, where there is an SG shortfall and a voluntary disclosure is made to the ATO within the amnesty period of 24 May 2018 and 7 September 2020.

For employers, particularly those paying above the SCG rate, who have made a late payment or intend to make a late payment to offset the SGC or carry it forward as a pre-payment of a future contribution, the liability is not discharged until the ATO is notified.

Unlike many other employee entitlements, there is no limitation period on the obligation to pay superannuation and the obligation to backpay SG does not expire.

The passing of the SG Amnesty coupled with real time reporting via mandatory single-touch payroll (STP), signals a new era for super compliance.

The STP reporting will allow the ATO to see if superannuation guarantee payments are being made, nearly in real time. The ATO has signalled that it will be using STP to identify non-compliant employers and some employers have already received queries about their superannuation compliance triggered by their STP reporting.

Underpaying superannuation – common mistakes

Some common mistakes include:

  • incorrectly calculating ordinary time earnings;
  • incorrectly treating individuals as contractors when they are employees; and
  • excluding individuals who are deemed employees under the relevant legislation (including failing to consider the statutory expansion of the meaning of employees, which mandates superannuation payment for some types of contractors).

What you should do next

Employers, including those who pay above the SGC rates, should undertake a full legal review of superannuation compliance to identify any current or historical non-compliance. For more information on how the SG Amnesty can impact you and the steps we have taken to assist employers in making a voluntary disclosure, please see our process guide.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.