The Federal Government’s Superannuation Guarantee Amnesty was given royal assent on 6 March 2020 with a six-month timeframe. Hence, the Amnesty window is due to close on 7 September 2020 – it is just around the corner!
The Amnesty provides employers with an opportunity to make good on unpaid superannuation obligations relating to the period 1 July 1992 to 31 March 2018.
Normally, when unpaid in full by the due date (28th day after each quarter), employers become liable for the Superannuation Guarantee Charge (SGC), being the amount of the unpaid superannuation (but calculated on all salary and wages amounts not just ordinary times earnings) plus an interest component of a nominal 10% (from the start of the relevant quarter) and a $20-per-employee-per-quarter administration fee. None of this is tax-deductible and is all administered by the lodgement of a Super Guarantee (SG) statement.
Failure to lodge the Super Guarantee statement by the due date (28th day of the second month after each quarter) can expose the employer to an additional non-deductible administrative penalty of up 200% of the SGC amount payable. General interest charge is also payable on any unpaid amount.
For example, ABC Pty Ltd has 20 employees with payroll totalling $250,000 for the quarter ended 30 September 2019 in respect of ordinary times earnings with a further amount of $15,000 for paid overtime. The table set out below demonstrates the impact if ABC Pty Ltd does not pay its SG obligations on time:
|Employer pays SG obligation on time i.e. 28 October 2019
|Employer Liable for SGC – lodges SG statement on 31 July 2020
|$250,000 x 9.5% = $23,750
|$265,000 ($250,000 + $15,000) x 9.5% = $25,175
|Total amount payable
|Tax deductible amount
|Subject to further penalty
|Yes – up to 200% administrative penalty and GIC for any unpaid portion
Terms of the amnesty
Given how high the penalties for the SGC can be, the terms of the Amnesty are generous. If an employer qualifies for the amnesty:
- the SG shortfall will still be payable, but payments of SGC made between 24 May 2018 and 11:59 pm on 7 September 2020 will be tax-deductible;
- the notional interest component and any general interest charge will still be payable;
- the $20 per employee per quarter administrative component will be waived; and
- the threat of the 200% administrative penalty (Part 7 Penalty) for late lodgement is removed.
To be eligible, employers must do the following:
- during the Amnesty period (24 May 2018 to 7 September 2020) disclose to the ATO, via the approved form, an SG shortfall for all employees that hasn’t already been disclosed;
- disclose the SG shortfall in respect of any quarter from 1 July 1992 to 31 March 2018,
- not been previously informed by the ATO that it is examining (or intends to examine) the employer’s SG compliance for the relevant quarter(s); and
- lodge the completed SG Amnesty form by 7 September 2020.
The Amnesty is not available in relation to SG shortfall amounts that have been previously disclosed to the ATO (but can apply to the disclosure of additional amounts of SG shortfall of the same quarter). However, if you previously disclosed unpaid SG to the ATO in anticipation of the SG amnesty, you do not need to lodge again or apply using SG Amnesty form.
The ATO will review all disclosures received between 24 May 2018 and 6 March 2020. If a disclosure is eligible, they will apply the Amnesty law and issue notices of amended assessment to reflect that the benefits of the Amnesty have been applied retrospectively.
Why you must act now
Employers must lodge their application for the Amnesty by 7 September 2020.
The ATO will continue increasing its reviews and audits using the greater data visibility that is available to them. If they identify employers who have not met their obligations and who have not come forward in the Amnesty period, none of the benefits of the Amnesty will be available and employers will again be exposed to the 200% Part 7 Penalty with a minimum penalty of 100% if remission is available (but this is in very limited circumstances).
Remember that with almost all employers electronically reporting in real time under Single Touch Payroll-compliant payroll software, getting caught is a lot easier.
Impact of COVID – 19
If employers want to participate in the Amnesty the law requires them to apply by 7 September 2020. However, given the economic impact of COVID – 19 the ATO understands that payment by this date may not be possible. Hence the ATO will work with an employer to establish a payment plan but please note, the ability to extend the payment plan to beyond 7 September 2020, the end of the Amnesty period, will mean that only payments made by 7 September 2020 will be deductible.
If, after negotiating a payment plan with the ATO, the employer is unable to maintain payments under that plan, the law requires the ATO to then disqualify them from the Amnesty and remove the Amnesty benefits. However, the disqualification will only apply to any unpaid quarters. The ATO will advise the employer which quarters are unpaid and for those quarters they will re-apply the administration component of $20 per employee included in the disqualified quarter.
The ATO will however, take employers circumstances into account when deciding whether a Part 7 penalty should be applied – a review of their circumstances may result in the Part 7 penalty being reduced to nil.
Director Penalty Regime
Please also remember that the director penalty regime operates to impose upon the directors of companies a personal liability equal to the company’s unpaid SGC or PAYG withholding amounts. A penalty equal to the amount of SGC is automatically imposed (and due and payable) on all directors at the end of the day on which the SG statement for the quarter must be lodged. If no SG statement is lodged, the ATO has the power to make an estimate of the unpaid SGC for the quarter and recover the estimated amount from any or all directors 21 days after servicing a director penalty notice on them.
The ATO can also issue a written direction to an employer requiring payment of the actual or an estimated amount of SGC. Failure to comply with the direction will be a criminal offence and can result in penalties or imprisonment. This is intended to be used in cases of ongoing and intentional disregard of SGC obligations.
How can Nexia Edwards Marshall NT help you?
Please contact Sarah McEachern or your Nexia Edwards Marshall NT Advisor if you wish to discuss your SGC obligations or wish to take advantage of the amnesty.