The Government has introduced a Bill into Federal Parliament to resurrect the previously lapsed superannuation guarantee amnesty. But this time, a stick accompanies the carrot.
Amnesty 2.0 – the carrot
Employers will be able to make good on unpaid employee superannuation guarantee contributions for the period 1 July 1992 to 31 March 2018. Normally, when superannuation guarantee contributions are unpaid by the due date (28th day after each quarter), employers become liable for the “superannuation guarantee charge”(SGC), being the same amount as the unpaid superannuation contributions plus an interest component and a $20-per-employee-per-quarter administration fee. That total amount is paid to the ATO and is not tax deductible. The superannuation contributions are eventually paid by the ATO to the employees’ superannuation funds.
When the SGC scheme was introduced in the early 1990s, the superannuation guarantee contributions were expected to be in excess of wages; that is, wages could not be reduced by the contributions. Since then, remuneration packages are often negotiated to include superannuation guarantee contributions. Effectively, employers who have not paid their superannuation guarantee contributions have effectively fallen short in paying their employees’ remuneration aside from being in breach of the SGC law.
The aim of the amnesty is to enable employers to pay outstanding superannuation contributions without SGC and the administration charge being imposed yet still gain a tax deduction for the contributions. Interest will still be payable. Factoring in the benefit of the time value of money, the employer will be substantially closer to where they would have been, had they paid their employees’ superannuation guarantee contributions on time.
Under the amnesty, an employer can pay the SGC or pay the outstanding contributions plus interest directly to an employee’s superannuation fund.
Amnesty 2.0 will be retrospective to the original Amnesty announced start date of 24 May 2018, and end six months after the Bill receives Royal Assent. This means those employers who took up the proposed first Amnesty in good faith and who were left exposed to the existing law, can breathe a sigh of relief – assuming the Bill passes (receives Royal Assent), of course.
We should mention that Labor and the Greens in the previous Parliament opposed the first Amnesty because they felt that Amnesty let defaulting employers “off-the-hook” and could encourage more employers not to meet their SGC obligations in the knowledge that another amnesty my occur in the future. But in Amnesty 2.0, the Government has dealt with employers having such thoughts.
Now for the stick
Employers who don’t take up Amnesty 2.0, and who are later identified for not paying their superannuation guarantee contributions, will face a minimum 100% penalty on top of the unpaid contributions. When eventually paid, the unpaid contributions and penalty will not be tax deductible and the administration charge plus interest will be payable.
Remember that almost all employers will soon be required to electronically report employees’ wages in real time under Single Touch Payroll-compliant software resulting in the ATO having little difficulty in ascertaining unpaid superannuation guarantee contributions.
The clear message with Amnesty 2.0 is “use it, or else!”. We recommend that employers take this opportunity to calculate and pay any unpaid superannuation guarantee contributions before the new penalty regime begins.
How can Nexia help?
We would be pleased to assist any employer review their SGC obligations and determine whether:
- Their current practices of calculating superannuation guarantee contributions are correct; and/or
- Superannuation guarantee contributions for earlier periods or years are correct. If not, the concessions in Amnesty 2.0 are valuable.
The above checks will give employers certainty that the SGC law is being complied with and avoids scrutiny from the ATO that could lead to a more comprehensive tax audit.