Attention employers! If you’ve fallen behind with your superannuation guarantee (SG) obligations you now have an additional 12 months to “self-correct” under a new amnesty announced late last month.
Why has this amnesty been announced? Simply because it’s a big issue in this country. The ATO estimates that $2.85 billion is currently owed in late or missing SG payments. Running from 24 May 2018 for 12 months, the amnesty is actually doing you a favour. How? It encourages employers to reduce this SG gap by providing relief from the punitive penalties that normally apply to late payments.
Even if you don’t think that your business has an SG underpayment issue, it’s worth looking a little deeper and undertaking a payroll audit to ensure that your payroll calculations are correct, and that employees are being paid at a rate that is consistent with their entitlements under workplace laws and awards.
Do you qualify for the amnesty?
The amnesty applies to employers that have underpaid or not paid SG for any period from 1 July 1992 up to 31 March 2018.
To qualify for the amnesty, employers must disclose the outstanding SG to the Tax Commissioner using the SG Amnesty ATO payment form or the SG Amnesty Fund payment form where the payment has been made directly to the employee’s fund.
Let’s talk about your payment options
Your first option is to pay the full amount owing. If you’re not able to do that then you can enter into a payment plan with the ATO.
But there are a few things to keep in mind here:
- If you default on your payment plan the amnesty will no longer apply.
- Bear in mind that the amnesty only applies to “voluntary” disclosures. The ATO will continue its compliance activities during the amnesty period so if they discover the underpayment first, full penalties apply. The amnesty also does not apply to amounts that have already been identified as owing or where the employer is subject to an ATO audit.
So what do you actually have to pay under the amnesty?
Normally, if an employer fails to meet their quarterly SG payment on time they need to pay the SG charge (SGC) and lodge a Superannuation Guarantee Statement. The SGC applies even if you pay the outstanding SG soon after the deadline.
As an Employer you’ll pay:
- The SGC comprised of:
- The outstanding SG entitlements (although this component might be higher than what it would have been had the entitlements been paid on time)
- Interest of 10% per annum, and
- An administration fee of $20 for each employee with a shortfall per quarter
- Penalties of up to 200% of the amount of the underlying SG charge
- A general interest charge if the SGC or penalties are not paid by the due date
On top of this, the SGC amount is not deductible – even if you pay the outstanding amount. That is, if you pay SG late, you can no longer deduct the SG amount even if you bring the payment up to date.
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 SG charge would be payable (not from the date the SG was overdue).
Under the amnesty, employers pay:
- The SGC:
- The outstanding SG entitlements
- Interest of 10% per annum
- No administration fees
- No penalties
- A general interest charge.
An extra benefit of using the amnesty period to catch up is that the SGC amount is deductible. The ability to deduct SGC and the reduction in penalties could be significant for employers that have fallen behind with their SG obligations.
Special provisions exist within the legislation to automatically protect employees from inadvertently breaching concessional contribution cap limits if the unpaid SG 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.
Where to from here?
Legislation enabling the amnesty is currently before Parliament and will not become law until at least June 2018. Despite this, the clock is ticking.
If your business has fallen behind on its SG obligations and is eligible for the amnesty, we’re here to work through the issues with you. There are several calculations that need to be completed and these may take some time to complete.