Article:

Superannuation Guarantee Amnesty – time is running out

07 August 2020

Ben Renshaw , Partner, People Advisory, Global Expatriate Services & Employment Taxes |
James Trainor , Partner, Tax |

Second chances are rare and this one needs to be grabbed while you still can. Back in February the Senate approved the proposed Superannuation Amnesty Bill, paving the way for employers to self-correct historical non-compliance with their superannuation guarantee obligations.

Employers have been given an historic opportunity to do the right thing. But the six month window is almost shut (deadline is 7 September 2020 to qualify for favourable treatment), so you need to move quickly. The amnesty enables corporations to not only fix historical problems, but also ensure payroll is configured correctly going forward.

What is at stake?

Taking action now potentially saves your business large financial sums and significant heartache.

With amnesty

Without amnesty

  • Employers get a short window to make back-payments
  • Employers pay NO admin fees
  • Contributions paid during the amnesty are TAX DEDUCTIBLE
  • Employers face NO penalties
  • Employees get the full financial support they are due

 

  • Process to rectify an error is exhaustive and expensive
  • Employer identifies payment is owing
  • Employer pays contributions to ATO, comprising:
  • superannuation shortfall amount
  • applicable interest
  • an admin charge
  • Any late contribution made isn’t deductible for corporate tax purposes
  • Employer very likely* subject to non-compliance penalties, up to 200% of the superannuation guarantee charge

 

* ATO has now issued a draft statement for non-compliance after amnesty ends showing penalties will be applied in most cases. Exceptional cases may include a voluntary disclosure made where the employer does not have poor superannuation compliance history.

 

 

The 7 September deadline stands firm, despite the ongoing economic trouble brought on by COVID-19. However, the ATO has said payment plans can be set up for disclosures made within the amnesty period – a welcome boost in times of difficult cash flow. (Note however, that only contributions paid before 7 September will be tax deductible if a payment plan is approved).

Mind the innocent mistakes

Employers may have the best intentions, strive to do right by their employees and fulfil or even exceed their compliance requirements. But innocent mistakes still occur - things change over time, new legislation comes into effect, new payroll or software providers are used or new people enter the payroll team. Things can get complicated easily.

Now is the time to ask some important questions within your organisation:

  • Are we confident our superannuation contributions have always been correct?
  • Are we sure we have paid all employees correctly under certain Awards and EBAs?
  • Can we see clearly how our superannuation process has worked from day /employee one?
  • Has the organisation addressed any current or former employee complaints about superannuation contributions?
  • Have we ever completed a review of our processes?
  • Would our process withstand an ATO review?

If the answer to any of these questions is no, now is the time to act. Remember it takes time to:

  • pull the relevant data
  • understand it
  • ask the right questions
  • get everyone comfortable with what did and didn’t happen
  • understand what should and shouldn’t have happened
  • undertake the remediation.

While the amnesty is an incredible opportunity, the compliance and remediation can also be overwhelming. 

Scale gets the better of you very quickly. For example, say you’ve got 1,000 employees with a 60% turnover and you go back five years. That's a lot of employee data to have to pull and a lot of questions to answer:

  • What did you pay them?
  • Did you pay the right Super?
  • Were the wages and payroll configured correctly?
  • Have the rules been followed properly?
  • Who has been impacted?
  • When did it happen?
  • How much will it cost to remediate?
  • How will you repay the amounts owing (which may include interest, admin fees and/or penalties)?

These are tricky questions to answer, and with so much data comes significant complexity.

Employers have a responsibility to pay every employee’s superannuation correctly. This amnesty encourages employers do the right thing. It allows organisations to clear the air and do so in a way that benefits them and their employees. In this economic climate, it stops businesses wasting cash on admin charges and penalties and provides a welcome opportunity for tax deductions.

Superannuation Guarantee Risk Assessment Checklist

We have prepared a checklist to help you consider your SG liability and whether the SG amnesty is applicable to your organisation. Click the button below to download the checklist.

DOWNLOAD CHECKLIST

If you would like assistance, please complete the checklist and send it to your local BDO adviser.