You may have heard that the superannuation guarantee amnesty bill passed Parliament on 24 February and has now received Royal Assent and is law.
This law change provides several incentives for employers to correct any late or unpaid historical superannuation guarantee (SG) amounts relating to the period 1 July 1992 to 31 March 2018.
A Refresh on SG Obligations
The following outlines the basic SG obligations that each employer must meet:
- Pay superannuation for all staff (including owner directors) at the prescribed rate (currently 9.5%),
- Provide all employees with the choice as to which super fund their SG is paid to,
- Payment to have reached the super fund by the prescribed date – not just have left the employer’s bank accounts. The prescribed date is the 28th of the month following the end of each financial quarter which means:
- 28th October for July – September
- 28th January for October – December
- 28th April for January – March
- 28th July for April – June.
- Late or unpaid superannuation are both referred to as Shortfall Superannuation. Without the Amnesty, there are penalties for both late and unpaid superannuation as follows
- Late payments are not deductible,
- $20 administration fee per employee per quarter, not deductible,
- Interest dating back to 1st July of the financial year – regardless of what quarter the superannuation relates to, not dedudtible,
- Failure to Lodge Penalties of up to 200% of the Shortfall Superannuation Amount.
- As none of the above penalties are tax deductible; if you have claimed them as a tax deduction, there are further penalties and interest applicable under the income tax rules.
Not sure whether you have met your obligations? You can refer to the Tax Office website generally. Please note the following document provides a detailed understanding of your obligations. We can email this to you if you send a request by email.
https://www.ato.gov.au/Business/Super-for-employers/In-detail/SG-employer-obligations-course/
Superannuation guarantee amnesty benefits / incentives
Provided superannuation guarantee charge (SGC) relating to the period above is paid during the amnesty period of 24 May 2018 until 6 months after the date of Royal Assent (7th September 2020), eligible employers will receive the following benefits:
1. The SGC will be deductible
The SGC, which is usually non-deductible, is comprised of the following amounts:
- the total SG shortfall – that is, the total of the SG shortfalls for each affected employee,
- interest on SG shortfalls – currently 10% per annum on each individual SG shortfall commencing 1st July of the year in which it relates, and
- an administration fee – usually $20 per employee, per quarter (but note point 2 below).
2. The administration fee component of the SGC will be waived.
3. No penalties will be applied for failing to lodge an SGC statement.
In usual circumstances this penalty can be up to 200% of the SGC amount. A further incentive is that if any SG shortfall relating to the period between 1 July 1992 and 31 March 2018 is not disclosed during the amnesty period (24 May 2018 until 6 months after the date of Royal Assent) and this is subsequently uncovered by the Australian Taxation Office, a minimum penalty of 200% of the SGC will apply.
A couple of further points to note
- This is a massive issue and the Tax Office (and the Federal Government more broadly) have taken the gloves off.
- Subcontractors who provide predominantly their labour are often considered employees for the purposes of Superannuation Guarantee – even if paid via invoice and their ABN.
- SG obligations belong to the directors of a company personally and cannot be avoided by placing the company into liquidation.
Who should take advantage of the amnesty?
We think that every employer should be taking advantage of the amnesty and at a minimum completing a review of past compliance with the SG laws to determine if there were any late payments.
If you would like to discuss you SG obligations further or how best to proceed for your business, please email us at [email protected]