Super Guarantee Amnesty

Scroll down for a calculated example of how the cost of not reporting can escalate.

SG amnesty announced

As an employer if you have ever considered a review of your superannuation guarantee (SG) obligations, now is the ideal time to take action. In fact, if you think you may have unpaid or underpaid SG payments, it is critical that you self report within the next six months to avoid harsh penalties.

The Federal Government has reintroduced legislation, first announced in May 2018, to establish a one-off amnesty to allow employers who have fallen behind with their SG obligations the ability to “self-correct”. In addressing any historical SG non-compliance, employers can avoid substantial penalties.

Current obligations

  • Employers must contribute a minimum amount of superannuation to each employee’s chosen fund at the applicable rate (currently 9.5%) based on the employee’s ordinary time earnings. These contributions must be made quarterly.
  • Employers who do not comply with this obligation are liable to pay a Superannuation Guarantee Charge (SGC) which comprises of:
    • the shortfall amount
    • interest calculated at 10% per annum of the shortfall amount; and
    • an administration fee of $20 per affected employee for each quarter in which the shortfall arose

Important note: in addition to the SGC, employers are liable for penalties of up to 200% of the SGC amount, imposed at the Commissioner’s discretion. All payments including both the SGC and any penalties are non-deductible for income tax purposes.

Amnesty terms

Employers who voluntarily disclose their non-compliance to the ATO:

  • will be able to claim income tax deductions for the SGC amounts disclosed
  • will not be charged the administration fee
  • will not be subject to any further penalties

Important note: as the amnesty was first introduced in May 2018, the concessions under the amnesty only apply to shortfalls for the quarters up to and including the quarter ended 31 March 2018.

What happens if employers do not take advantage of the amnesty?

Once the amnesty is over (6 months after legislation has passed Parliament), the penalties for non-compliance will be a minimum of 100% and up to 200% of the SGC for any quarter covered by the amnesty with the ATO having no power to reduce the penalty.

What do employers need to do?

Even if you do not believe that your business has a SG underpayment concern, it is worth undertaking a payroll audit to ensure your calculations are correct and provide you with peace of mind.

If your business has fallen behind in your SG obligations this is an opportune time to address any historical issues without penalty. With the introduction of Single Touch Payroll, the ATO has access to significantly more data relevant to payroll and superannuation contributions so more than ever employers are at greater risk of detection of non-compliance. We encourage employers to take advantage of the favourable amnesty terms and confirm that SG contributions have been made in accordance with SG requirements.

 

Calculated example

Jack & Sarah operate a Stone Masonry business in the Western district.  They operate under a company called Dry Stack Walls of the West Pty Ltd.  They employ anywhere between 5-10 employees (both full time and casual) depending on work demands.  All employee super has been fully paid and on time during the life of the business however from time to time Jack and Sarah’s own super has been unpaid when cashflow has been difficult.

Over the past five years there have been eight quarters where their super has not yet been paid.  The total unpaid super for both Jack & Sarah totals $15,000.

Pre the Amnesty
Jack & Sarah are required to prepare super shortfall statements for them both for each quarter where the super has not been paid.  Along with the unpaid super they need to pay the admin and interest component.  The total payment, say $16,000 (including admin and interest component), is not tax deductible.  In addition to this, the commissioner has discretion to apply a further penalty of up to 200% of the amount owing.  The commissioner usually does not apply the discretionary penalty where super shortfall statements are voluntarily lodged.

During the Amnesty
Jack & Sarah are required to prepare super shortfall statements for them both for each quarter where the super has not been paid.  Along with the unpaid super they need to pay the admin and interest component.  The total payment, say $16,000 (including admin and interest component), is tax deductible.  The commissioner will not apply further penalties during the amnesty.

Post the amnesty
Jack & Sarah are required to prepare super shortfall statements for them both for each quarter where the super has not been paid.  Along with the unpaid super they need to pay the admin and interest component.  The total payment, say $16,000 (including admin and interest component), is not tax deductible.  In addition to this, the commissioner will apply a minimum further penalty of 100% up to a maximum of 200% of the amount owing.  The total payment required will be between $32,000 and $48,000 and is not deductible.

Summary
The after tax cost (assuming 27.5% corporate tax rate) for each scenario is:

Period of time After tax cost
Pre Amnesty $16,000
During Amnesty $11,600
Post Amnesty $32,000 to $48,000

 

Therefore the cost of not disclosing during the amnesty post the cut-off date is three to four times.

Please contact us if you require further information specific to your business or assistance implementing a review. Our Advisors can work with you to ensure your SG obligations are up-to-date giving you peace of mind. Phone 03 8850 3333, email obrien@obbc.com.au   or complete the form below.