Employers, who have historically underpaid superannuation guarantee (SG) to employees, must apply by 7 September 2020 to make disclosures during a one off amnesty to avoid penalties. There will be no extension beyond 7 September 2020 to make voluntary disclosures to receive amnesty benefits. On 30 March 2020, the ATO announced that those affected by the coronavirus pandemic (COVID-19) may enter into deferred payment plans to avoid losing deductions for the payment of underpaid SG.
On 18 September 2019, the Government re-introduced Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 (the Bill) into Parliament to establish and extend its proposed one-off amnesty to enable employers to self-correct historical underpayments of SG. The amnesty was originally announced on 24 May 2018 to take effect until 23 May 2019; however, the original Bill lapsed when Parliament was prorogued for the 2019 Federal Election.
The reintroduced Bill enables employers to self-correct historical underpayments of SG amounts without incurring additional penalties that would normally apply (up to 200 percent of the SG charge) as well as administrative penalties of $20 per employee, per quarter. The Bill passed both Houses of Parliament on 24 February 2020 and received Royal Assent on 6 March 2020. Employers that wish to participate in the amnesty, must apply by 7 September 2020.
To qualify for the amnesty, a disclosure must be made to the ATO in the approved form (and must not have been previously disclosed). Employers who have already disclosed unpaid SG charge under the lapsed previous bill between 24 May 2018 and 6 March 2020 do not have to reapply to the ATO. The amnesty does not relinquish employers of all their liabilities, and will still have to pay all SG shortfall amounts owing to their employees, including the nominal interest up to the date of disclosure and GIC up to the date of payment (but not the administrative component). An employer will lose all benefits from the amnesty if they fail to pay the SG charge on the disclosed shortfall.
Employers that have underpaid SG amounts and do not take part in the amnesty will face higher penalties if caught including a minimum 200 per cent penalty on top of the SG charge owed, consisting of outstanding superannuation plus 10 per cent interest and an administration fee.
Employers that take advantage of the SG amnesty will also be able to claim a tax deduction for payments of SG charge or contributions made during the amnesty period and have the ability to pay directly to employees’ funds rather than channelling these through the ATO.
The amnesty applies to SG shortfalls as far back as 1 July 1992, and up until 31 March 2018 (inclusive). The amnesty period starts from 24 May 2018 and run until 7 September 2020 (6 months after the day the Bill received Royal Assent). The legislation also includes ancillary amendments to ensure employees are not disadvantaged from lump sum remediation payments if concessional superannuation contributions caps are breached.
On 20 March 2020, the ATO acknowledged that employers affected by COVID-19 may not be able to pay their liability and advised that it would work with them to establish a payment plan that is flexible to help assist them in making payments. These arrangements include:
- flexible payment terms and amounts which we will adjust if circumstances change; and
- the ability to extend payment plans to beyond 7 September 2020, the end of the amnesty period (only payments made by 7 September 2020 will be deductible).
Employers unable to maintain payments after this time may be disqualified from the amnesty and relieved of its benefits. However, the ATO will:
- only apply the disqualification to any unpaid quarters; and advise employers which quarters are unpaid (in such instances it will re-apply the administration component of $20 per employee included in the disqualified quarter); and
- take into consideration whether special circumstances apply when deciding whether a Part 7 penalty should be applied to a disclosure (potentially resulting in the penalty being reduced to nil).
Despite the impact of COVID-19 on employers, the ATO has confirmed that there will be no extension beyond 7 September 2020 to make voluntary disclosures to receive amnesty benefits.
Certain employers, applying for the amnesty will be entitled to receive a refund. In particular employers:
- who are eligible and lodged a superannuation guarantee charge (SGC) statement between 24 May 2018 and 6 March 2020; or
- have made payments of SGC or contributions to employee superannuation funds in 2017-18 or 2018-19 that are eligible for income tax deductions,
There will be no extension beyond 7 September 2020 to make voluntary disclosures to receive amnesty benefits, therefore employers should therefore begin undertaking superannuation reviews as soon as possible to reveal any shortfalls in superannuation payments to employees (including current and former employees as well as contractors), which if discovered should be disclosed during the amnesty to avoid penalties.
Employers entitled to refunds for SGC or eligible contributions to employee superannuation funds should include this deduction in their tax return for the relevant year.
Those affected by COVID-19 should contact the ATO to discuss deferred payment plans to avoid losing deduction for the payment of underpaid SG during the amnesty period.