Superannuation Guarantee Amnesty: Time to act

by | Jun 12, 2020


Employers have been obliged to make superannuation guarantee payments since the September quarter 1992. Failure to make any of the payments on time leads to liability to pay the shortfall amounts, ‘nominal interest’, administrative charges, GIC, and penalties. As most would now know, the previously announced amnesty has been enacted and ‘the clock is running’. Employers and other persons (e.g. directors of corporate employers) need to be aware of the benefits of the amnesty, the disadvantages of failing to utilise it, the period to which the amnesty relates, the period within which it can be claimed, potential further action which can enhance the amnesty outcome, and other matters.

The clock is running

The Superannuation Guarantee amnesty was enacted on 6 March 2020. It arises under the Treasury Laws Amendment (Recovering Unpaid Superannuation) Act – ‘the amending Act’.

The amnesty can be accessed during the period (‘the Access Period’) from 24 May 2018 to 7 September 2020.

The amnesty uses a ‘stick’ as well as ‘carrots’ to encourage employers and, indirectly, other persons such as directors of corporate employers to deal with the failure to pay the required superannuation contributions on time for any quarter (an ‘amnesty quarter’) in the period from 1 July 1992 to 31 March 2018.

In addition to understanding the scope of the amnesty, advisers need to consider further action that will enhance the amnesty outcome and consider what, if any, implications the COVID-19 crisis may have.

A brief recap of consequences for failure to pay super on time

We have found that employers are often unaware that when a superannuation guarantee (‘SG’) contribution is not paid on time, it is not sufficient to make a catch-up payment of the unpaid contribution at a later date.  At present, contribution payments for a quarter are required to be made within 28 days of the end of the quarter.

In very broad terms, when a payment is not made on time, the consequences are:

  1. The employer must lodge an SG Charge Statement with the ATO by the 28th day of the second month following the end of the quarter for which the payment was not made on time.
    (e.g. An SG contribution in respect of the March 2020 quarter must be paid by 28 April 2020 and if not paid by that date an SG Charge Statement disclosing the non-payment must be lodged by 28 May 2020.)
  2. The Statement must be lodged, even if a late contribution is made before the required lodgement time.
    (e.g. In the above example, payment of the March 2020 contribution on 1 May 2020 would not avoid the need to lodge a SG Charge Statement.)
  3. Normally, super contributions are calculated as a percentage (currently 9.5%) of the employee’s ‘ordinary time earnings’ for the quarter. However, where the contribution is not made on time, the required super contribution (the ’employee’s shortfall’) is calculated as a percentage of the employee’s ‘salary and wages’ for the quarter. (Where a contribution is paid in part on time and in part late, there is a more sophisticated calculation that makes allowance for the on-time amount paid.) The most frequently encountered difference between ‘ordinary time earnings’ and ‘salary and wages’ is that the former does not include any overtime.
  4. Where a contribution has not been paid on time, the employer is required to compensate the employee for the payment being made late. The compensation takes two forms – ‘nominal interest’ and ‘general interest charge’ (GIC).
  5. In effect, the employer is required to calculate the ‘nominal interest’ on the employee’s shortfall from the beginning of the quarter to which the shortfall relates up to the date immediately prior to the date on which the SG Charge Statement is lodged. This interest is currently charged at 10% p.a. and is payable to the ATO along with the amount of the employee’s shortfall. Basically, the ATO will pay the employee’s shortfall and nominal interest into the employee’s super fund (or in certain limited circumstances otherwise deal with it for the benefit of the employee).
  6. From the date of lodgement of the SG Charge Statement, GIC accrues to the extent the employee’s shortfall has not been paid by that date. The employer must pay the GIC to the ATO. This GIC is also ultimately paid to the employee’s super fund, etc.
  7. In addition to the employee’s shortfall, nominal interest and GIC, the employer must pay an administrative charge (currently $20) for each employee in relation to each quarter in which there is a late contribution for the employee. The administrative payment is retained by the ATO.
  8. Where an employer makes a catch-up payment, the employer may (in certain circumstances) elect in a notice given to the ATO to apply the catch-up payment in reduction of the employer’s liability to pay nominal interest and the employee’s shortfall arising in respect of a quarter – a ‘late payment offset’. (The catch-up payment can also be utilised in another limited way, but this is beyond the scope of this article.)
  9. The employer is also liable to a penalty of up to 200% of the superannuation guarantee charge for a quarter. The superannuation guarantee charge is the sum of all employee shortfalls, nominal interest and administration charges for the quarter.
  10. While the employer would have been entitled to an income tax deduction for any super contribution paid on time, the employer is not entitled to a deduction for payment of the super guarantee charge or any catch-up payment applied as a late payment offset.

The Superannuation Guarantee (Administration) Act 1992 (‘SGA’), and this article, refers collectively to all employee shortfalls payable by an employer for a quarter and all nominal interest and all administration charges (as outlined above) arising from such employee shortfalls as the superannuation guarantee shortfall (‘SG shortfall’) for the quarter. The super guarantee legislation technically imposes an obligation (the ‘SG Charge’) on the employer to pay the SG shortfall for the quarter to the ATO as a collective sum, rather than as a series of separate quarterly amounts applicable to each employee.

The above recap is not intended to be a definitive guide to the consequences of failing to pay the correct SG contribution on time, especially as the consequences and circumstances under which a shortfall can arise have changed since the SGA was introduced and an employer will need to consider its superannuation payment records and determine amounts of superannuation contributions outstanding for any quarter based on the SGA as it applied in relation to the relevant quarter. However, the recap indicates the consequences in general.

The Amnesty in overview

The ‘Carrots’

In essence, the amnesty allows an employer to disclose to the ATO employee shortfalls for amnesty quarters (the quarter commencing on 1 July 1992 up to and including the quarter ending on 31 March 2018) with the following benefits:

  • The employer will not incur a penalty in relation to the SG charge (or, where there has been a pre-amnesty voluntary disclosure of SG charge for a quarter followed by an amnesty disclosure for the assessed quarter, the increase in the SG charge) that arises from the shortfall disclosed in relation to an amnesty quarter – cf. subpara. i above.
  • Employers are able to claim an income tax deduction for payment of the SG charge (or, where there has been a pre-amnesty voluntary disclosure of SG charge for a quarter followed by an amnesty disclosure for the assessed quarter, the increase in SG charge) arising from a shortfall disclosed in relation to an amnesty quarter – cf. subpara. j above. However, the payment must be made in the Access Period.
  • Employers are able to claim an income tax deduction for a catch-up payment that is made during the Access Period and which is applied as a late payment offset (see subpara. h above) in relation to an amnesty quarter – cf. subpara. j above.
  • Where an administrative charge (see subpara. (g) above) arises in relation to an amnesty quarter solely due to the disclosure being made in the Access Period, the administrative charge will not apply. (Note that, if the amnesty disclosure relates to an increase in the SG charge for the amnesty quarter, the administrative charge will have already arisen and been included in the original calculation of the SG charge for the quarter and this will not be waived due to the disclosure of the increase.)

The amnesty does not relieve the employer of the obligation to pay an employee shortfall, nominal interest or GIC for an amnesty quarter.

The COVID crisis warrants a practical comment. The need to make payments within the Access Period (as mentioned in the second and third points above) may raise concerns for employers who would otherwise be interested in accessing the amnesty. Whilst the ATO recently stated they understand these concerns, they note that the law requires employers to apply by 7 September 2020. Instead, the ATO are offering to work with affected employers to establish flexible payment plans. However, they observe that employers entering into such payment plans should be mindful that only payments made by 7 September 2020 will be deductible.

Conditions for accessing the amnesty

An employer is only able to invoke the amnesty in relation to the employer’s SG shortfall for an amnesty quarter where the following conditions are met:

  1. During the Access Period the employer must disclose to the ATO, in the approved form, information that relates to the amount of the SG shortfall, for the first time.(Note that the disclosure may relate to the whole of the SG shortfall for the quarter (i.e. there has not been any previous disclosure) or the disclosure may relate to an increased amount of SG shortfall (i.e. the employer has, prior to the Access Period, disclosed an amount of SG shortfall in relation to the quarter and is disclosing a further amount of SG shortfall during the Access Period. In the latter case, the amnesty benefits only arise in relation to the increase. The amnesty is not intended to provide relief from pre-amnesty disclosures. If there has been pre-amnesty disclosure, it is aimed at encouraging fuller disclosure where the employer has realised the earlier disclosure was incomplete.)
  2. Basically, prior to the disclosure, the ATO must not have commenced/advised an intention to examine the employer’s compliance with its superannuation guarantee obligations in relation to the quarter. More particularly, the ATO must not, at any time before the disclosure, have informed the employer that the ATO is examining (or that the ATO intends to examine), the employer’s compliance with an obligation to pay the SG Charge for the quarter.(Note that indication of an intention to investigate the employer’s compliance need not be made prior to the Access Period. It seems that such indication will prevent an employer relying on the amnesty if made during the Access Period and prior to the employer’s disclosure. This favours early disclosure, in order to avoid pre-emptive ATO action.The Explanatory Memorandum (‘EM’) in relation to the amending Act regards an ‘examination’ by the ATO as a broad term encompassing ‘a range of compliance activities’, including ‘reviews, audits, verification checks, record-keeping reviews/audits and similar activities’- see para. 1.32.)
  3. The employer has not been disqualified from benefiting under the amnesty.(Note that the ATO has a discretion to disqualify an employer where:
    • payment of the SG Charge imposed on the disclosed SG shortfall/increase in the SG shortfall is not made within the time required by the SGA and the employer has not entered into a payment arrangement in relation to the amount to be paid; or
    • having entered into a payment arrangement, the employer does not comply with the payment arrangement.Disqualification retrospectively terminates all amnesty benefits.For purposes of complying with the amnesty payment requirements, special arrangements apply to payments made during the Access Period and which meet the liability to pay the SG Charge imposed on SG shortfalls/increases in SG shortfalls that are disclosed under the amnesty, even though the ATO may in fact apply the payment to the employer’s debt for an earlier SG Charge. The aim is that the employer should during the Access Period, in fact, pay amounts corresponding to the SG Charge amounts identified through the amnesty disclosure and not be discouraged from disclosure through the existence of pre-existing unpaid SG Charges.)

The ‘Stick’

With legal effect from 6 September 2020 (see item 4 of s. 2 of the amending Act), there is (with one limited exception) an assured minimum penalty where an SG shortfall for an amnesty quarter is not voluntarily disclosed to the ATO. This is considered in more detail below. (Note that the minimum penalty can only apply to an amnesty quarter – it does not apply to the June 2018 and subsequent quarters.) The minimum penalty will not detract from the amnesty because an employer entitled to the benefit of the amnesty will not incur the penalty.

Significantly, the minimum penalty potentially applies (see EM at paras 1.78 and 1.79) to employers who are unable to access the amnesty, as well as to those who are able to do so but choose not to.

It was noted in subpara. i of the consequences recap that a penalty of up to 200% of the superannuation guarantee charge can be imposed – i.e. at present, the quantum of the penalty is not subject to any minimum amount. Basically, from 6 September 2020 onwards, where:

  • an employer is liable for such penalty in respect of an amnesty quarter;
  • there is information that is relevant to the amount of the employer’s SG shortfall for the relevant quarter;
  • since the start of the Access Period, either (i) the employer has not disclosed the relevant information to the ATO or (ii) has only disclosed the information after the ATO informed the employer that the ATO was examining or intended to examine the employer’s compliance with the obligation to pay the SG Charge for the relevant quarter (see s. 62(4)(c) inserted in the SGA by the amending Act) ; and
  • taking the relevant information into account, the SG shortfall for the quarter exceeds the SG shortfall that would exist if the information were not taken into account;

then the penalty in relation to the increase in the SG Charge that is referrable to that increase in the SG shortfall must be at least 100% of that SG Charge increase.

In relation to condition (ii) in the third dot point, it appears that where the ATO has concluded the examination without identifying the SG shortfall indicated by the relevant information that is later disclosed, such disclosure is not made ineffective by that condition (ii). The EM (at para. 1.75) states:

‘The Commissioner is not considered to have relevantly informed an employer of an examination of the employer’s compliance if the examination has previously concluded and the disclosure relates to additional amounts of SG shortfall for the quarter that was not identified as part of the examination.’

The third dot point is encapsulated in the new s. 62(4)(c) SGA and its form raises a question with respect to actual disclosures pre-dating the Access Period. The EM (at paras. 1.78 and 1.79) indicates that the provision was ‘inter alia’ designed with a view to the minimum penalty not applying where:

‘ … the employer does not qualify for the amnesty because the information was previously disclosed to the Commissioner before the [Access Period].’

Enhancing the Amnesty outcome

As observed above, employers may pay SG contributions late. This constitutes non-compliance with the SG Act and the need to lodge an SG Statement, with attendant nominal interest and, potentially, GIC.

As the amnesty does not provide relief from nominal interest or GIC, the amnesty outcome may be enhanced through close attention to opportunities to utilise the SG Act provisions in relation to catch-up payments. Webb Martin Consulting can assist with such utilisation.

Conclusion – time to act?

With COVID-19 impacting on cash flow now, and likely to have continuing impact as the economy struggles back from its torpor, employers will understandably be disinclined to open a tap through which more cash will flow out. However, they will need to be conscious that inaction comes at a heavy cost as the stick of a 100% penalty after the Access Period is vicious.

Employers should also bear in mind that delay in voluntary disclosure may preclude access to the amnesty, even during the Access Period, if the ATO instigates investigatory action during that period.

Employers should be checking their exposure to SG charge liability now.

Longer term employers may need to reactivate archived accounting systems – a process that invariably takes time.

Employers whose records are incomplete should also bear in mind that time is required to gather data from super funds to fill any information gaps. While, in our experience, retail and industry super funds are able to assist with requests for information, absorption of one super fund by another can create difficulties and delays in accessing historical data.

Once the level of exposure is identified, it is appreciated that, as a practical matter, employers will want to assess their commercial position. In doing so they will need to weigh against this the amnesty ‘carrots’ and ‘stick’ and their ability to make timely payments in order to enjoy the ‘carrot’ of tax deductibility.

We are aware that many of our readers are under intense pressure at present. Webb Martin Consulting can assist you in helping you/ your employer-clients respond to the amnesty.


This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. Webb Martin Consulting Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.


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