Date posted: 26/02/2020

Parliament gives Super Guarantee Amnesty the green light!

Amnesty will run for only six months

In brief

  • The amnesty will finish six months after the Bill receives Royal Assent.
  • Employers can apply for an exemption from normal SG penalties
  • Higher penalties will apply once the amnesty period ends

Normal SG penalties for late payment

Ordinarily an employer will face five penalties for not paying SG contributions on time or not submitting a SG Charge Statement by the due date:

  • Unpaid employer super contributions
  • Per employee quarterly ATO administration fee ($20 per quarter per employee)
  • Notional unpaid earnings on unpaid contributions
  • ATO imposed penalties that can be between 0% and 200% of the liability
  • General interest charge where the SG charge or penalties are not paid by the due date

Further penalties can be applied for false or misleading statements.

All these costs are not tax deductible.

The first three amounts in this list are generally reallocated to each nominated employee's superannuation account.

Payment deadlines

Ordinarily employers owe SG contributions 28 days after the end of each quarter:

  • 28 October – September quarter
  • 28 January – December quarter
  • 28 April – March quarter
  • 28 July – June quarter

If SG contributions are not paid by these dates then employers need to submit an SG Charge Statement to the ATO within 28 days of the start of the following month – that is, 28 November, 28 February, 28 May and 28 August.

Note:

  1. The contribution is not made until cleared funds have been received by the relevant super fund or by the Small Business Super Clearing House (which over the years has been administered by various government departments)
  2. Ignoring the ethical aspects of the following until 1 January 2020 an employer could count salary sacrifice contributions as contributions to satisfy the Super Guarantee.

What remuneration measurement is typically used?

For most employers this is based on Ordinary Time Earnings which often includes different amounts than Salary and Wages.

View ATO's checkllist

Overtime the SG percentage has changed. It was initially 3% of OTE for smaller employers and 4% for larger employers. It is now 9.5% for all employers. See below for a handy table.

An added complexity to this requirement can be the remuneration calculations under industrial awards and agreements. (Any non-compliance with these employment standards needs to be determined separately to that applying under this SG amnesty.)

Who are employees?

The definition of employee has its ordinary meaning but is expanded to include a broader range of people including those operating under labour hire contracts. It also includes people who perform artists, musicians and sportsmen and women.

SG Amnesty Period

The amnesty applies for any quarter between 1 July 1992 and 31 March 2018.

To apply to access the amnesty an employer must self report SG non-compliance to the ATO between 26 May 2018 and late August or early September 2020 (the precise end date depends on the day the amending legislation will receive Royal Assent).

The self-reporting must occur on the "approved form" which is an excel spreadsheet that can be downloaded from the ATO's website. (At the time of writing the ATO's amnesty approved form had not been published. It will be made available not long after Royal Assent has been granted.)

Is an employer eligible to apply for the amnesty?

Only employers that any time before applying for the amnesty have not been informed by the ATO that it is examining the employer's SG compliance for a quarter may apply to use the amnesty. Employers that have previously been disqualified from participating also cannot benefit from the amnesty.

Employers that have the capacity to pay on the day they apply for the amnesty, and does not have an existing SG charge assessment, may choose to make the contributions of SG shortfall and notional interest directly into an employee's superannuation account. Otherwise the payments must be made to the Commissioner.

Where an employer fails to enter into a payment arrangement with the ATO to pay, or to pay any SG charge imposed, will lose the benefits of the amnesty that they may have been able to access.

SG penalties applying under the amnesty

Compared to normal SG penalties and those that will apply once the amnesty window closes the proposed SG amnesty penalties are very attractive. They are as follows:

  1. Unpaid employer super contributions
  2. Notional unpaid earnings on unpaid contributions

Further these costs will be tax deductible.

Contribution tax issues

When the ATO remits any unpaid SG amnesty contributions to an employees super account, the employee will be able to apply to the ATO to have that contribution exempted from the contribution caps. This concession will not apply if an employer pays the amnesty contributions direct to a super fund.

Broadly the higher income earners tax (sometimes called Division 293 tax) will not apply to SG amnesty contributions.

SG penalties applying under the amnesty

Once the amnesty is over an employer will face the same five non-tax deductible penalties that apply before the amnesty came into operation if they do not pay SG contributions on time and do not submit a SG Charge Statement by the due dates.

However an important point to note is that the ATO imposed penalties must be between 100% and 200% of the liability.

As above further penalties can be applied for false or misleading statements and the first three amounts in this list are generally reallocated to each nominated employee's superannuation account.

Further reform required

The government needs to soften the SG penalties that apply when an employer does not contribute by the legislated due dates. There can be no denying that deliberate non-payment of SG contributions is effectively wages theft. Regrettably employers sometimes find themselves in very difficult circumstances – severe bushfires, cyclones, floods, droughts and other events beyond everyone's control – which prevents their ability to meet ordinary liabilities. Businesses need some leeway to help them do the right thing while they get their feet back on the ground after these unforeseeable events. This concession should not be a freely available but would only be accessed with Tax Office approval. The concession should allow an employer to make good SG non-payment in a timely and fair manner for all concerned taking into account a "force majeure" type situations.

SG contribution historical table