Legislation has been introduced that proposes to give employers, who have historically underpaid super contributions on behalf of employees, the opportunity to make disclosures and avoid super guarantee penalties during a one off amnesty.
On 18 September 2019, the Government re-introduced Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 (the Bill) into the House of Representatives to establish and extend its proposed one-off amnesty to enable employers to self-correct historical underpayments of Super Guarantee (SG).
The amnesty was originally announced by the Government 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 proposes to enable 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 AUD20 per employee, per quarter.
To qualify for the amnesty, a disclosure must be made to the ATO in the approved form (and must not have been previously disclosed). An employer will lose all benefits from the amnesty if they fail to pay the SG charge on the disclosed shortfall.
The amnesty does not relinquish employers of their liability, and will still pay all SG shortfall amounts owing to either the ATO or their employees’ super funds, including the nominal interest and GIC (but not the administrative component). However, the Government is hoping that the amnesty will encourage employers to come forward and pay outstanding SG amounts by not hitting them with the penalties usually associated with late payment.
Employers that do not take part in the amnesty will face higher penalties if caught including a minimum 100% penalty on top of the SG charge owed, consisting of outstanding super plus 10% 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 employee’s super funds rather than channelling these through the ATO.
The amnesty will apply to SG shortfalls as far back as 1 July 1992, and up until the quarter starting on 1 January 2018 (inclusive). The amnesty period will start from 24 May 2018 and run until 6 months after the day the Bill receives 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.
Employers should begin undertaking superannuation reviews to reveal any shortfalls in superannuation payments to employees (which includes current and former employees as well as contractors), which if discovered should be disclosed to the ATO during the amnesty to avoid penalties. Whilst the date of the amnesty is currently unconfirmed, superannuation reviews should still begin immediately as the amnesty will cover SG contribution entitlements dating back almost 30 years.
Employers should also note the ATO’s current pilot on using data from super funds combined with data collated during single touch payroll reporting to identify anomalies such as where payments are late in which case the ATO will conduct a ‘health check’ with businesses suspected of not paying SG entitlements properly.
The amnesty also aligns with other proposed changes to superannuation in Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, which is currently before the Senate, that seek to stop employers using salary sacrifice to reduce actual SG contributions.
BDO is able to provide advice in relation to employer’s superannuation guarantee obligations, including conducting superannuation prudential reviews and how to take advantage of the amnesty.