The superannuation guarantee amnesty gives employers the opportunity to review historical compliance with their superannuation guarantee (SG) obligations and rectify any underpayments or late payments for quarter(s) between 1 July 1992 to 31 March 2018. However, the concessions offered under the Amnesty are only available until 11:59 pm on 7 September 2020.
Why it is important to take advantage of the amnesty
The Hon Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology, released a press statement on 5 August 2020 confirming the amnesty will not extend beyond 7 September 2020, and employers “must come forward and disclose to the ATO before the amnesty expires on 7 September 2020”.
In respect of any shortfalls not disclosed under the amnesty by 7 September 2020, employers will be subject to penalties of at least 100% if detected by the ATO through audit or review.
Additionally, company directors can be pursued by the ATO via a Director Penalty Notice, should outstanding SGC liabilities be identified. In doing so, company directors can become personally liable for a penalty equivalent to the unpaid liability.
Concessions under the amnesty
Generally, in cases where an employer underpays superannuation or pays amounts late, they must lodge a Superannuation Guarantee Charge (SGC) statement with the ATO. The SGC amount comprises the shortfall amount, nominal interest on that shortfall and an administration fee. The ATO can also impose penalties on the SGC amount. Furthermore, the SGC amount and penalties are not tax deductible for employers. However, the superannuation guarantee amnesty offers a unique opportunity to lodge SGC statements and enjoy significant concessions.
The table below details the concessions offered under the amnesty:
|Nominal interest @ 10% per annum||Payable||Payable|
|Administration component ($20 per employee, per quarter)||Waived||Payable|
|Part 7 penalty (up to 200% of the SGC)||Waived||Payable at minimum 100% of SGC|
|Deductibility of SGC and penalty||Deductible*||Non-deductible|
* Deductible if paid during the period beginning 24 May 2018 to 7 September 2020 (Amnesty period).
The ATO recently released Draft Practice Statement Law Administration “PS LA 2020/D1” as part of its guidance on the remission of SGC penalties. The document sets out a 4-step process for what the ATO will consider when making a decision on whether or not to remit any additional SGC for an employer. Under this, the ATO will generally impose a minimum penalty of 100% of the SGC for amounts not disclosed during the amnesty period.
In addition, the ATO has said that they “will take a very strict approach to penalties where an employer could have come forward voluntarily to disclose an SG shortfall and failed to do so”. In light of the strict approach being adopted by the ATO and the comments of the Hon Jane Hume, it is incumbent on employers to consider whether they need to disclose any historical SG non-compliance and take advantage of the generous concessions the amnesty offers prior to 7 September 2020.
The ATO has confirmed that, aside from allowing employers to enter into payment plans for outstanding debts, they will not be giving any leniency to employers who have experienced difficulty or hardship because of the COVID-19 pandemic.
This case study illustrates the potential savings and benefits the amnesty can provide as well as the risks associated with not disclosing by 7 September 2020.
Diligent Pty Ltd inadvertently made a late payment of SG in the March 2018 quarter for 100 of its employees. The following additional facts apply:
- Salary and wages are equal to ordinary time earnings (OTE).
- The shortfall (late payment) totalled $100,000 and was actually paid on 1 May 2018.
- Interest is $22,500 (figure is rounded, assuming that SGC statement was lodged with the ATO on 1 August 2020).
The table below considers the cost of two scenarios:
Scenario 1 – Diligent Pty Ltd makes a voluntary disclosure to the ATO during the amnesty period; and
Scenario 2 – Diligent Pty Ltd does not disclose to the ATO during the amnesty period.
|Payment component||Scenario 1:
Disclosure during amnesty
Risk of additional liability post-amnesty
|Nominal interest @ 10% p.a.||$22,500||$22,500|
|Administration component ($20 per employee, per quarter)||$0||$2,000|
|Total SG charge||$122,500||$124,500|
|Less SG already paid||($100,000)||($100,000)|
|Total payable on SGC statements||$22,500||$24,500|
|Part 7 penalty (minimum 100% of the SGC)||$0||$124,500|
|Additional (saving) due to deductibility (assuming 30% corporate tax rate)||($7,200)||$0|
Therefore, the potential costs to a business is the non-deductibility of the SGC payments as well as the significant penalty impost for the late payment or underpayment.
Further information regarding the amnesty is available here.
What should I do now?
We encourage all employers to do the following:
- Determine when SG payments were received by the nominated superannuation fund(s) and whether these were within required timeframes;
- Check that you comply with the requirements of your employees’ industrial awards and employment contracts to ensure you have correctly defined the ordinary hours of work and not underpaid your SG contributions relative to OTE;
- Undertake a review of the payroll system to check that you have paid the correct amount of SG contributions based on OTE at the applicable rate (currently 9.5%); and
- Review all individual contractors to determine if there is a risk they may be deemed by the ATO to be employees.
Please note that a future dispute by an aggrieved employee or contractor who believes they are entitled to superannuation contributions could instigate a full review by the ATO.
How Pitcher Partners can assist
Pitcher Partners recognises the significant burden and challenges for businesses to undertake thorough reviews and correct errors, especially during these challenging times. We offer a number of services and tools to assist you in taking advantage of the amnesty before it expires on 7 September 2020.
Pitcher Partners offers the following services to employers to identify and rectify areas of non-compliance:
- Complete a review of your payroll and identify non-compliance;
- Identify and correct causes of non-compliance;
- Calculate SGC on under/late payments; and
- Correct non-compliance via preparation and lodgement of the SGC statements and liaising with the relevant taxation authorities.
SGC Analyser tool
Our Data Analytics team has developed a ‘SGC Analyser’ tool that combines comprehensive data analysis and automation to not only create ease in this process, but also highlight potential cost saving opportunities. The SGC Analyser tool can transform and test inputted data to comprehensively analyse and calculate SCG amounts under various scenarios using alternative calculation methods. Various reports can be generated and tailored to your organisation’s circumstances to provide clarity and confidence in your business compliance.
What are the next steps?
It is critical to consider your position and what steps will be appropriate for your organisation leading up to the end of the amnesty.
For further information or support, or to discuss the benefits of utilising the SCG Analyser, please contact a Pitcher Partners representative.