Recently, there has been a spate of articles and discussion in the media regarding employers failing to pay employee superannuation guarantee (SG) contributions.
To entice employers to ‘fess up and pay up’, the Government has introduced legislation into Parliament providing for a 12-month amnesty for employers who disclose and pay their unpaid SG contributions.
Current State of Play
Currently, employers who underpay or pay SG late are subject to the superannuation guarantee charge (SGC), which is made up of:
- SG shortfall amounts;
- A nominal interest charge on those amounts (currently set at 10% and applied from the beginning of the quarter the SG payment related to); and
- An administration fee.
Payments of the above are all non-deductible to the employer. Additionally, where late payments are used to reduce SGC liabilities, these payments cease to be deductible. Depending on the circumstances, additional penalties may also apply.
Prospective measures seeking to ensure compliance with SG obligations have been implemented by the Government via the upcoming requirement for certain employers to use Single Touch Payroll (STP) (which is also anticipated to roll out more broadly in the future). STP is expected to provide an easier mechanism for the ATO to confirm that employers are paying employees their SG on time and in full. However, this measure does not assist with historical compliance.
In a bid to encourage employers to self-correct historical SG non-compliance, the Government has announced a once-off, twelve-month amnesty (Amnesty) from 24 May 2018 to 23 May 2019.
Under the Amnesty, employers who are not currently under audit can voluntarily disclose to the ATO previously undeclared SG shortfalls relating to periods from 1 July 1992 to 31 March 2018 and make payments to satisfy the shortfall. However, the Amnesty is not available in relation to SG shortfalls that relate to the periods starting on or after 1 April 2018.
Employers who voluntarily disclose under the Amnesty will:
- Not be liable for the administration component and penalties that would otherwise apply to late SG payments; and
- Be able to claim deductions for the payments made in the propose 12-month Amnesty period.
Whilst disclosing under the Amnesty will require employers to pay all outstanding employee entitlements, as well as the the nominal interest charge applied under the SG charge rules, employers will be able to claim a deduction for the SG payments – something that is not currently permitted under the SG charge rules and represents a significant benefit to employers.
Employers are not required to take advantage of the Amnesty. However, the ATO has warned that employers who have undeclared SG shortfalls and who do not take advantage of the Amnesty may face higher penalties in the future if they are investigated.
In addition, there are circumstances where an employer can lose access to the Amnesty.
Current status of the Amnesty
The Legislation to give effect to the Amnesty was introduced into Parliament on 24 May 2018 and has been referred to the Senate Committee for review and report by 18 June 2018.
The ATO has confirmed that if the Amnesty is not passed but employers have disclosed SG shortfalls on the basis the Amnesty would be available to them:
- Contributions and payments made will not be tax-deductible;
- Any self-assessments will need to be amended to include the administration component;
- The administration component will need to be paid;
- The normal penalties will be imposed with current remission policies applied.
In other words, the normal penalties will apply.
Employers should review their records to ensure that they have fully complied with their SG obligations. As errors in controls can lead to inadvertent deficiencies in SG, it is worth employers undertaking a review regardless of whether their payroll/superannuation function is in-house or external.
Where deficiencies are found, employers should consider whether to take advantage of this Amnesty, given the potential benefits of the Amnesty, but also considering the uncertainty regarding the Amnesty being enacted.