The superannuation guarantee (SG) is an important part of our taxation system, but it can be very complex. Mistakes in the calculation or payment of SG do happen, and the consequences of this can be extensive and ultimately quite expensive for employers.
In May 2018, the Government announced a one-off 12-month Superannuation Guarantee Amnesty (the Amnesty). The Amnesty was intended to provide employers with a once off opportunity to disclose SG errors or mistakes to the Australian Taxation Office (ATO) without the risk of a penalty. However, the legislation to establish the amnesty did not pass the last parliament.
The proposed SG amnesty is now back on the table after more than a year of uncertainty, as the government recently re-introduced the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 into Parliament. Should the bill pass without amendments, the amnesty period will start from 24 May 2018 and end six months from the date it receives Royal Assent.
What are the benefits of the Amnesty?
Outside of the Amnesty, when an SG mistake is disclosed, an employer must pay an SG charge calculated on all salary and wages of the employee for the period in question (this can include allowances, termination payments, lump sum payments and overtime), instead of “ordinary time earnings” which is what SG is normally calculated on. On top of this increased SG base, the employer is also liable for interest, administration charges and possibly additional penalties. In addition, these amounts are not tax-deductible.
The benefits of the amnesty for employers are as follows:
- employers can claim tax deductions for payments of SG charge or contributions made during the amnesty period to offset SG charge and;
- avoid the administration fee (i.e. $20 per employee per quarter) and;
- avoid the Part 7 penalty that may otherwise apply in relation to historical SG non-compliance.
How would I know if I haven’t paid SG correctly?
SG can be complex and as such it can be easy to make errors in its calculation or payment that result in an SG shortfall. Indicators to look out for that you might have an SG shortfall include:
- Late payments of SG (i.e. later than the 28th day after the end of the relevant quarter).
- Your accounting system (MYOB, Xero, QuickBooks etc) doesn’t automatically calculate SG on ordinary times earnings items such as non-contingent allowances or standard overtime.
- An employee hasn’t provided their superannuation fund details and so you haven’t made an SG payment on their behalf.
- Engaging workers as contractors who may be deemed an “employee” for SG purposes.
If any of these indicators sound familiar, or you have any concerns about the status of your SG obligations, keep reading!
Current status with Parliament
The legislation to give effect to the Amnesty was re-introduced into Parliament on 18 September 2019, and if enacted, will apply retrospectively. Although the ATO has provided significant information on their website and has provided various template forms for employers to complete and submit to make a voluntary disclosure, until the legislation is enacted, the Amnesty is not yet available.
As such, currently, the administration component of the SG charge remains legally payable and deductions cannot be claimed. It is important to note that if the Amnesty law does not pass, you will not be able to receive a refund for payments you have made that were intended to be paid under the Amnesty.
What action is needed?
If you are concerned about the status of your SG obligations, or if you would just like some additional comfort that your SG obligations are being met, we can undertake an “SG health check” for you. This would include reviewing your SG obligations over a certain period and identifying any indicators of errors or problems. If an SG shortfall (or indicators of such) is uncovered, we can assist you with the process of taking corrective action.
The new bill is also proposing to increase penalties on employers who do not meet their SG obligations once the amnesty period is over. Directors may be personally liable where a company fails to meet its SG obligations.
In respect to the Amnesty, we are monitoring the status of the draft legislation very closely and once it becomes law, we will take immediate action in notifying you of this progress.
If you would like an SG health check done for your business, or have any questions on SG or the Amnesty, please feel free to contact our employment taxes team.
We will provide further updates on the Amnesty once it has been finalised by Parliament.