Employers who have underpaid any superannuation guarantee (SG) to employees may avoid onerous penalties if they disclose the underpayments to the Australian Taxation Office (ATO) and pay the outstanding amounts before 7 September 2020.
This deadline is effectively an extension of the amnesty first announced on 24 May 2018. Therefore, employers should not expect any further extension beyond the 7 September 2020 deadline.
How to qualify for the amnesty
To qualify for the amnesty, an employer must satisfy the following criteria:
- Have not been notified by the ATO of a review of SG obligations in respect to the quarters any disclosures relate to;
- The disclose of a SG shortfall for an employee must be in respect to a quarter starting from 1 July 1992 to 31 March 2018;
- Lodge a completed SG amnesty form with the ATO by 7 September 2020; and
- Pay the SG shortfall amount by 7 September 2020.
During the amnesty period, the ATO continues to conduct reviews and audits in relation to SG compliance, so employers should act now.
Benefit of the amnesty
If an employer qualifies for the amnesty, they:
- Will be able to claim a tax deduction for the SG shortfall amount paid. The SG shortfall is normally not deductible;
- Will not be subject to any penalty, which is otherwise up to 200% of the SG shortfall plus an administrative penalty of $20 per employee per quarter. The ATO have indicated that after the amnesty is over, employers that have underpaid SG amounts will face a minimum 100% penalty; and
- Will have the ability to pay the SG shortfall directly into employees’ funds rather than channeling these through the ATO. Employees will not be disadvantaged from any lump sum remediation payments if concessional superannuation contributions caps are breached.
Impact of COVID-19
There will be no extension of time for the amnesty because of COVID-19.
However, the ATO understands that employers affected by COVID-19 may not be able to pay their liability. As such, they have advised that they can work with these employers to establish a payment plan to assist them in making SG shortfall payments where the payments cannot be made by 6 September 2020. 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. However, 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 for any unpaid quarters.
What you should do
Employers should begin undertaking superannuation reviews as soon as possible to reveal any shortfalls in superannuation payments to employees. Where errors or omissions have been made, disclose these before 7 September 2020.
In undertaking a superannuation review, the following common mistakes should be a focus:
- Paying insufficient super contributions for eligible employees. Superannuation is payable on ordinary time earnings, which can differ under relevant awards and employment contracts.
- Missing the quarterly cut-off dates (28 October, 28 January, 28 April, 28 July).
- Not understanding that in some circumstances super should be paid for contractors, even if the contractor quotes an ABN. Super contributions need to be paid for contractors employed under a contract that is wholly or principally for the contractor’s labour.
- Not passing on an employee’s tax file number to their super fund. Employers must provide their employee’s tax file number to their super fund within 14 days of receiving it.
Undertaking a superannuation review and disclosing to the ATO can all be handled by our expert team at Calibre Business Advisory. If you have any questions, do not hesitate to contact us on 0292612177.