The Minister for Revenue and Financial Services announced a 12 month Superannuation Guarantee Amnesty on 24 May 2018. This Amnesty is intended to rectify historic Superannuation Guarantee (SG) compliance through offering employers an opportunity to correct any payment shortfalls without the usual hefty penalties involved.

While this is good news for employers (and employees who will be more likely to receive any missed SG entitlement shortfalls), it has caused controversy with the Australian Labor Party saying they will vote against it supposedly because “crooked employers would be allowed off the hook”. This could cause problems as the Government moves to get the legislation passed in Parliament this month.

Below we answer the top seven questions being asked about the Superannuation Guarantee Amnesty.

Question 1: If legislated, what are the benefits of the Amnesty for employers?
The terms of the amnesty proposed are that:

• 1. An employer self-reviews their payroll history to determine whether superannuation shortfalls exist for any period between 1 July 1992 and 31 March 2018
  2. Where shortfalls exist the employer lodges a form with the Australian Taxation Office (ATO) to disclose the amount of superannuation that is owed to previous or current employees
  3. The employer then pays the shortfall and interest of 10% per annum – if funds are not available immediately then the employer needs to enter into a payment arrangement with the ATO
  4. The employer completes each of the above steps between 24 May 2018 and 23 May 2019.

Where the terms of the amnesty are met this provides benefits for the employer who will:

• 1. Not have to pay the Superannuation Guarantee Administration Fee (outside of the Amnesty this is $20.00 per employee with a shortfall, per quarter with a shortfall)
  2. Not face any penalties for non-compliance that has been rectified (outside of the Amnesty these can be up to 200% of the amount of the shortfall including the interest of 10% per annum and the $20.00 administrative fee per employee with a shortfall, per quarter with a shortfall)
  3. Be entitled to claim deductions on any catch-up payments made within the Amnesty period (outside of the Amnesty, any late superannuation payment, penalities, administration fee and interest are not deductible).

Question 2: So does the Amnesty really reward dodgy practices?
The Amnesty can only be construed as reward for employers who are prepared to self-audit and self-rectify their historical mistakes, including making payments. Is an employer who is prepared to do that really ‘dodgy’? Someone who is dodgy is more likely to keep taking the chance of not being found out.

Question 3: What happens if an employer doesn’t take advantage of the Amnesty?
Employers who choose not to take advantage of the amnesty period will face penalties if an audit subsequently finds they have short paid superannuation entitlements. These would be a minimum of 50% more than they would have paid if they had instead taken advantage of the Amnesty.

Question 4: Will the ATO still be pursuing Superannuation Guarantee compliance during the Amnesty?
Yes. This highlights the importance of employers being proactive about completing payroll audit and rectifying issues themselves rather than waiting until they are investigated. If the ATO uncovers a compliance issue themselves during the Amnesty period, without the employer already having identified it, the employer will not receive the benefits of the Amnesty.

Question 5: What if the Amnesty is not passed?
Multinational law firm Ashurst is advising employers not to disclose shortfalls until the Amnesty is legalised. However, even if it is not passed or it is amended, voluntary disclosures of shortfalls are more likely to be subject reduced penalties.

Question 6: So what are the action items?

• 1. Identify whether you have any instances of SG shortfalls by auditing your payroll. This applies to any period between 1 July 1992 and 31 March 2018. It is important to consider whether any contractors are classified as employees under the SG provisions which may give rise to a SG shortfall – this article may be helpful: https://www.ashurst.com/en/news-and-insights/legal-updates/superannuation-guarantee-amnesty-12-months-for-employers-to-ensure-compliance/
  2. Complete the Superannuation Guarantee Charge statement for shortfalls identified. This then needs to be lodged with the ATO and payment made direct to the ATO. It is their responsibility then to distribute the super to the relevant employees. If the Amnesty is passed into law, they will apply the benefits retrospectively.

Question 7: What happens if making an outstanding SG payment makes an employee exceed the contributions cap?
The Commissioner is entitled to disregard the contributions made under the Amnesty. If you make payment direct to the ATO and lodge the SG Amnesty ATO Payment form, then the employee will not need to apply for the Commissioner’s discretion. If you make payment direct to the employee’s fund and lodge the SG Amnesty Fund Payment Form then the employee will need to apply to the Commissioner for the payment to be disregarded or allocated to another financial year.

The Superannuation Guarantee Amnesty is just one of a number of measures the Government is has introduced to try to cut back the amount of SG they estimate is currently owed to employees.

If you have any questions about the Amnesty, call us on 03 5339 3200 or contact us here to discuss.

Thanks for reading.

By Genna Kidd
 

Article updated 10 October 2018

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