On 6 March 2020, the legislation introducing the Superannuation Guarantee Amnesty (amnesty) received Royal Assent.
The amnesty provides employers with a strong incentive to disclose any historic non-compliance with their superannuation guarantee (SG) obligations. In the majority of cases, this non-compliance may be entirely inadvertent, for instance, due to a mischaracterisation of an employee as an independent contractor, changes to payroll systems, or incorrect calculations of employees’ ordinary time earnings which is not a simple task, as evidenced by the ATO’s 278-paragraph ruling on this issue.
We urge employers to immediately commence reviewing their historic SG compliance in order to take advantage of the amnesty.
What super guarantee quarters are covered by the amnesty?
The amnesty will cover all quarters from 1 July 1992 and ending 31 March 2018. Accordingly, employers who have operated for several years will face a significant task of reviewing their historical compliance.
What are the tax benefits for employers under the amnesty?
The tax benefits to employers under the amnesty are as follows:
- The administrative component of the SG charge ($20 per employee per quarter) is not payable;
- No penalties will be imposed (normally, penalties of up to 200% of the SG charge may apply); and
- Payments of the SG charge made during the amnesty period are tax deductible.
When is the amnesty period?
The amnesty period commences from 24 May 2018 and ends six months after the day the legislation received Royal Assent (6 March 2020).
Only corrective payments of the SG charge made during the amnesty period will be deductible. For instance, if an employer enters into a payment arrangement with the ATO, any instalment payments made outside of the amnesty period are not deductible.
Employers intending to make disclosures under the amnesty may need to ensure they have the financial resources to make potentially large SG payments within this short window.
What happens if an employer with a SG shortfall does not come forward?
The sting in the tail is that if employers do not come forward during the amnesty period, the ATO will not have the discretion to remit penalties to below 100% of the SG liability, other than in ‘exceptional circumstances’ which is very difficult to demonstrate.
This is a harsh outcome, as such penalties are automatically imposed where an employer lodges a late SG statement for the quarter or fails to provide information relevant to assessing their SG liability.
The Commissioner of Taxation’s full discretion to remit penalties will be unaffected from the quarter commencing 1 April 2018 and later quarters (such quarters not covered by the amnesty).
Can you take advantage of the amnesty if you are under ATO audit?
In order for an employer to qualify for the amnesty in respect of a SG liability for a quarter, the ATO must not have informed the employer that it intends to examine the employer’s SG compliance for that specific quarter. The employer may make disclosures in respect of SG liabilities for quarters outside of the audit period.
This restriction reflects that the amnesty is only available to employers who voluntarily disclosure their non-compliance, and is not intended to provide protection from non-compliance as identified through ATO compliance activity.
How can Rigby Cooke help?
We can work with you in reviewing your company’s historic SG compliance and make necessary disclosures to the ATO, and we would recommend that you take action now to commence this process.
Employers’ compliance with their SG obligations continues to be a key focus area of the ATO. In 2018-19, the ATO examined the records of over 22,000 employers to address SG non-compliance and we expect this trend to continue.
Another significant incentive to take advantage of the amnesty is that company directors can be made personally liable for SG shortfalls under the director penalty regime.
* The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 passed the Senate on 24 February 2020.
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