This amnesty has been designed to provide employers with a window of opportunity to correct any past SG non-compliance without penalty.
The amnesty period applies for all disclosures made by employers from 24 May 2018 (when the Bill was first introduced) and will cease on 7 September 2020 (six months from receiving Royal Assent).
Specifically, the amnesty allows employers to:
- disclose and pay previously unpaid Super Guarantee Charge (SGC), including nominal interest, for the quarters commencing 1 July 1992 through to 31 March 2018 without incurring the administration component or Part 7 penalty; and
- claim a tax deduction on payments made to the ATO after 24 May 2018 and before 7 September 2020.
Employers need to apply for the amnesty by 7 September 2020 to be eligible.
Note: If you have already been assessed for a quarter, you can amend a previously disclosed SG shortfall to ensure that newly-disclosed additional amounts will be considered for the benefits of the amnesty.
Why you should act now
The ATO’s ability to identify underpaid SG has increased as a result of more frequent reporting requirements by super funds and employers. This information is increasingly being used to identify employers that have underpaid SG.
The ATO will continue to conduct reviews and audits to identify employers not paying their employees SG. If they identify these employers before they come forward, they will not be eligible for the benefits of the amnesty.
They will also be required to pay:
- SG shortfall
- nominal interest (10%)
- administration component ($20 per employee per quarter)
- Part 7 penalty (up to 200% of the SGC)
In addition, payments of the SGC won’t be tax deductible.
If you want to participate in the amnesty, the law requires you to apply by 7 September 2020.
However, while the law does not allow variation to the due date for lodgement of an amnesty application, the ATO acknowledges the difficult times the community has been experiencing recently with COVID-19 and the 2019–20 bushfires.
Therefore, if as a result of COVID-19, you apply for the amnesty but your circumstances change and you are not able to pay the liability, the ATO will work with you to establish a payment plan that is flexible to help you continue making payments. These arrangements include:
- flexible payment terms
- the ability to extend the payment plan to beyond 7 September 2020 (however, only payments made by 7 September 2020 will be tax deductible).
How does the SG Amnesty Work?
Currently, an employer who fails to contribute the minimum 9.5% of an employee’s ordinary time earnings (OTE) to their superannuation fund by the due date can be faced with the following penalties:
- SG Charge (composed of SG shortfall, nominal interest component, and a $20 per employee per quarter administration component)
- Penalties (known as Part 7 penalties) for failing or refusing to provide information or a statement as required under the law, which can be up to 200% of the amount of the SG charge
- General Interest Charge, where the SG charge or Part 7 penalties are not paid by the due date
Generally, an employer can claim a tax deduction for contributions they make on behalf of an employee. However, late contributions and any associated charges in relation to shortfalls are not tax deductible under the current law.
New SG Amnesty Legislation
Under the SG Amnesty, an employer has the opportunity to disclose and rectify SG shortfalls between 1 July 1992 and 31 March 2018 and is provided with the following concessions:
- The ability to claim a tax deduction in respect of the SG payments made during the amnesty period for the relevant quarters to the extent they relate to the SG shortfall
- Interest of 10% per annum on shortfall payments still applies, however the administrative component will be waived (saving $20 per employee per quarter)
- Part 7 penalties will not be applied
Note, payments made after the end of the amnesty period will not be tax deductible, even if a payment plan is in place.
How do I know if I’m eligible for the amnesty?
To be eligible for the amnesty you must meet and fulfil all the following criteria. You must:
- not have been informed the ATO is examining or intends to examine your SG obligation for the quarter(s) your disclosure relates to
- disclose an SG shortfall for an employee that you haven’t already disclosed to the ATO (or disclose additional amounts of SG shortfall for a quarter previously disclosed)
- disclose for a quarter between 1 July 1992 and 31 March 2018
- lodge your completed SG amnesty form with the ATO so it is received no later than 7 September 2020.
Note: You will also need to pay the amount owing to the ATO or set up a payment plan after you lodge the SG amnesty form. You need to do this to avoid being disqualified and losing the benefits of the amnesty.
Ceasing to qualify
An employer may cease to qualify, or be taken to have never qualified for the amnesty, where the ATO gives notice due to the following reasons:
- the employer has not paid the SG charge or entered into a payment arrangement that includes SG
- the employer failed to comply with arrangement
If I’m eligible, what do I need to do to access the amnesty?
Step 1: Employers first need to calculate the relevant SG. The ATO’s Superannuation Guarantee contribution calculator will assist you to determine if you have correctly paid your SG.
Step 2: If you determine that you have shortfalls, you can apply to access the amnesty using the approved form and process as detailed on the ATO website.
Step 3: Once you have successfully applied for the amnesty, you can meet your obligations in one of two ways:
- pay the full amount owing to the ATO; or
- enter into a payment arrangement with the ATO
Your Bentleys advisor can help you with applying for the amnesty and making any payments.
Are there any other important considerations?
Contributions made under the amnesty are considered concessional contributions, and may cause employees to exceed their $25,000 annual contributions cap. Individuals will need to apply for commissioner’s discretion to ensure they are not disadvantaged by the amnesty payments.
If you have questions or require any assistance – Bentleys are here to help you. Contact us today.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.