Many employers seeking to take corrective action under the Superannuation Guarantee Amnesty (the Amnesty) may currently be so overwhelmed by the impacts of the COVID-19 pandemic that they do not consider they have the financial resources to apply for the Amnesty.
The Amnesty is currently in force for a period of 6 months, ending on 7 September 2020.
The ATO has advised that if taxpayers wish to make disclosures under the Amnesty but are experiencing difficulty making corrective payments as a result of COVID-19, the ATO will work with taxpayers to establish a flexible payment plan.
Such arrangements may include:
- flexible payment terms and amounts, which the ATO will adjust if circumstances change;
- the ability to extend the payment plan beyond 7 September 2020 – however, only payments made by 7 September 2020 will be deductible to the employer.
If the ATO establishes a flexible payment plan with an employer, and the employer is unable to maintain payments, the law requires the ATO to disqualify the employer from the Amnesty and remove the Amnesty benefits. However:
- the disqualification will only apply to any unpaid quarters;
- for those quarters which are unpaid, the ATO will re-apply the administration component of $20 per employee included in the disqualified quarter;
- the ATO will take the employer’s circumstances into account when deciding whether the ‘Part 7 penalty’ should be applied to the employer’s disclosure – the ATO advises that a review of the employer’s circumstances may result in a penalty remission to nil (normally, Part 7 penalties of up to 200% of the unpaid superannuation may be imposed).
The above approach will assist employers who cannot maintain payments under the Amnesty. The fact that the disqualification will only apply to unpaid quarters will mean that the ATO will not wind back all Amnesty benefits that have accrued to an employer by amending the employer’s assessments.
What are the tax benefits under the Amnesty?
The Amnesty provides employers with a strong incentive to disclose any historic non-compliance with their superannuation guarantee obligations, for the quarters from 1 July 1992 and ending 31 March 2018. Employers must make disclosures during the Amnesty period, which commenced from 24 May 2018 and will end on 7 September 2020.
As a recap, the tax benefits to employers under the Amnesty are as follows:
- No administrative component of the superannuation guarantee charge is payable ($20 per employee per quarter);
- No Part 7 penalties will be imposed;
- Payments of the superannuation guarantee charge made during the Amnesty period are tax deductible.
Employers must therefore make all corrective payments by 7 September 2020 to ensure such payments are tax deductible.
Further information regarding the Amnesty is available here.
How can Rigby Cooke help?
Under the ATO’s concessionary approach, we would have preferred to see employers afforded with the ability to claim tax deductions for corrective payments made after 7 September 2020, given that this is the main incentive for employers to make disclosures under the Amnesty. The financial impact of COVID-19 may make it impossible for many employers to make all Amnesty payments within this window.
We can assist you in reviewing your company’s historic superannuation guarantee compliance and applying to the ATO for the Amnesty. We understand how difficult the current climate is, and we can assist you in managing your obligations under the Amnesty.
If you are already making payments under the Amnesty and experiencing financial difficulties, we can negotiate a suitable payment plan on your behalf with the ATO, including the remission of Part 7 penalties.
The Government has received submissions to extend the Amnesty period beyond the current end date of 7 September 2020, given the COVID-19 crisis. At present, the Government has not indicated that the Amnesty period will be extended. We consider it is necessary to extend this deadline to ensure employers are afforded with the ability to take corrective action, especially given that the payments will ultimately benefit employees.
|Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.
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