May 30, 2018 Emily Kermac

One-off Super Guarantee Amnesty

Emily Kermac

Emily Kermac

Partner
Emily Kermac is adept at small business structures, restructures and champions the growth of our clients. Her efforts are focussed on the optimal tax outcomes via trusts and SMSF’s.

Employers that have fallen behind with their superannuation guarantee (SG) obligations will have 12 months to “self-correct” under a new amnesty announced late last month.

The ATO estimates that $2.85 billion is currently owed in late or missing SG payments. Running from 24 May 2018 for 12 months, the amnesty encourages employers to reduce this SG gap by providing relief from the punitive penalties that normally apply to late payments.

Even if you do not believe that your business has an SG underpayment issue, it is worth undertaking a payroll audit to ensure that your payroll calculations are correct, and employees are being paid at a rate that is consistent with their entitlements under workplace laws and awards.

Qualifying for the amnesty

The amnesty applies to employers that have underpaid or not paid SG for any period from 1 July 1992 up to 31 March 2018.

To qualify for the amnesty, employers must disclose the outstanding SG to the Tax Commissioner and either pay the full amount owing or enter into a payment plan with the ATO.

Bear in mind that the amnesty only applies to “voluntary” disclosures. The ATO will continue its compliance activities during the amnesty period so if they discover the underpayment first, full penalties apply. The amnesty also does not apply to amounts that have already been identified as owing or where the employer is subject to an ATO audit.

What employers normally pay

Normally, if an employer fails to meet their quarterly SG payment on time they need to pay the SG charge (SGC) and lodge a Superannuation Guarantee Statement:

  • The SGC comprised of:
    • The outstanding SG entitlements (although this component might be higher than what it would have been had the entitlements been paid on time)
    • Interest of 10% per annum, and
    • An administration fee of $20 for each employee with a shortfall per quarter
  • Penalties of up to 200% of the amount of the underlying SG charge
  • A general interest charge if the SGC or penalties are not paid by the due date

On top of this, the SGC amount is not deductible – even if you pay the outstanding amount. That is, if you pay SG late, you can no longer deduct the SG amount even if you bring the payment up to date.

What employers will pay under the amnesty
  • The SGC:
    • The outstanding SG entitlements
    • Interest of 10% per annum
    • No administration fees
  • No penalties
  • A general interest charge.

An extra benefit of using the amnesty period to catch up is that the SGC amount is deductible. The ability to deduct SGC and the reduction in penalties could be significant for employers that have fallen behind with their SG obligations.

Where to from here?

Legislation enabling the amnesty is currently before Parliament and will not become law until at least June 2018. Despite this, the clock is ticking.

If your business has fallen behind on its SG obligations, and is eligible for the amnesty, you need to start working through the issues now or contact us to work through the issues with you. There are several calculations and ATO forms that need to be completed and these may take some time to prepare.

If your business has engaged any contractors during the period covered by the amnesty, then the arrangements will need to be reviewed as it is common for contractors to be classified as employees under the SG provisions.

If you have not undertaken a payroll audit or an audit of rates paid to employees, you should do this within the next 12 months.

If a problem is revealed, you can correct it without excessive penalties applying. If you are uncertain about what Award and pay rates apply to employees, the FairWork Ombudsman’s website has a pay calculator or you can contact them online or call them on 13 13 94.

For further information please Paris Financial on 03 8393 1000.

Emily Kermac, Manager, Paris Financial

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Emily Kermac

Emily Kermac

Partner
Emily Kermac is adept at small business structures, restructures and champions the growth of our clients. Her efforts are focussed on the optimal tax outcomes via trusts and SMSF’s.

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