Superannuation guarantee amnesty: last chance to come forward. — Brown Wright Stein Lawyers | Sydney Lawyers - Tax Specialist Lawyers, Corporate & Commercial Lawyers..

This week the ATO will be sending reminders to employers that the superannuation guarantee amnesty ends on 7 September 2020.

The purpose of the amnesty is to encourage employers to come forward and disclose underpayment of superannuation entitlements for the period of 1 July 1982 to 31 March 2018, with the incentive of not incurring the usual penalties for underpayment. Employers then have the option of either repaying the unpaid amounts in full, or entering into a payment plan with the ATO.

Employers are usually required to contribute an amount equal to 9.5% of an employee’s ordinary time earnings to a superannuation fund for the employee. Superannuation contributions are generally deductible to an employer.

Where an employer fails to make the necessary superannuation contributions for an employee within a required statutory timeframe, the employer is liable to pay the superannuation guarantee charge (SGC). Under normal, non-amnesty circumstances the SGC is not deductible – in contrast to the contributions by the employer which generally are deductible.

However, under the amnesty, employers who have not complied with their superannuation contribution obligations can come forward and avoid some of the consequences of having to pay the charge. Payments of the SGC made during the amnesty period will be tax deductible, will not include the administrative fee component, and there will be no penalties imposed on the employer.

The key aspects of the amnesty as compared to the current regime are:

What do employers need to do?

Employers who already disclosed between 24 May 2018 and 6 March 2020 in anticipation of the amnesty do not need to formally apply or lodge an application. The ATO will review all disclosures made during this period and apply the amnesty law.

Employers disclosing from 6 March 2020 until 7 September 2020 are required to make an application utilising the prescribed form.

If the ATO commences an audit of, or informs an employer of its intention to commence an audit in relation to, the employer's superannuation contributions, that employer is no longer eligible for any benefits of the amnesty.

Instead, if the audit uncovers unpaid superannuation contributions, the employer will not only be required to pay the unpaid SGC, but also nominal interest of 10%, an administration fee of $20 per employee per quarter, and penalties of up to 200% of the SGC. In addition, the payment of SGC will not be tax deductible.

To qualify for the amnesty:

the employer must disclose the superannuation guarantee shortfall within the amnesty period for the first time;
the ATO cannot have informed the employer previously that it is examining or intending to examine its superannuation guarantee compliance for the particular quarter; and
the employer must pay the SGC that was imposed on the disclosed shortfall by the time it is due and payable or enter into and comply with a payment arrangement for the amount.

Superannuation Guarantee Amnesty and COVID-19

The ATO has indicated that it will work collaboratively with those who participate in the amnesty, including making arrangements for flexible payment plans which can be amended as circumstances change, and allowing for the terms of these plans to extend beyond 7 September 2020. However, only payments made before 7 September 2020 will be tax deductible.

If an employer chooses to participate and after a period, cannot continue making payments, the employer will be disqualified from the amnesty. The disqualification will only apply to unpaid amounts to which the $20 administration fee will be charged. The ATO will exercise discretion in relation to the application of penalties, taking into account the employer's circumstances. It is possible that the penalty will be reduced to nil.

Please contact us to discuss if you or your clients have late paid or underpaid superannuation contributions.

The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.