Act now to benefit from the Superannuation Guarantee Amnesty
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As Covid-19 related restrictions gradually ease and business resumes, one issue that warrants urgent attention from company directors is the Superannuation Guarantee Amnesty (‘Amnesty’), which is due to expire on 7 September 2020.
Eclipsed by the Covid-19 outbreak when it came into force on 6 March 2020, the Amnesty has only three months left. Therefore now is the time to review your superannuation compliance position and utilise the Amnesty if there are any outstanding SG liabilities.
The Amnesty provides employers with a one-off opportunity to voluntarily disclose and payback historical superannuation guarantee shortfalls, covering the quarters from 1 July 1992 to 31 March 2018. To qualify for the scheme, employers need to:
- Self-disclose SG shortfalls to the ATO during the Amnesty period (from 24 May 2018 and 7 September 2020), and
- Not have been subject to an investigation by the ATO with respect to SG obligations (which could be triggered by an employee/contractor complaint) prior to the voluntary disclosure.
The carrot and stick
To incentivise voluntary disclosure, employers that self-report and pay outstanding Superannuation Guarantee Charge (‘SGC’) during the Amnesty are exempted from the administration fee component of the SGC ($20 per employee per quarter in shortfall) and the Part 7 penalty (up to 200% of the SGC). Moreover, they will also be entitled to a tax deduction on the amount paid back over the Amnesty period (normally SGC is not tax-deductible).
In contrast, the harsh penalty will be imposed on those who could have qualified for the SG Amnesty but failed to take any action. The new penalty regime that will commence post- Amnesty stipulates that apart from the nominal GIC and the administration fee, non-compliant employers would be subject to a mandatory Part 7 penalty of at least 100% of the SGC. This would more than double their existing SGC liabilities, and no tax deduction will be granted for repayment under this scenario.
Superannuation liabilities and Director Penalty Notice
Unlike many other employee entitlements, there is no limitation period on the obligation to pay superannuation or SGC. Even if a company goes into liquidation, its directors may still be held personally liable for any SGC debt owed by the company through the Director Penalty Notice regime (for more details about DPN, click here).
Furthermore, as single-touch payroll (STP) becomes mandatory, the ATO is able to monitor superannuation guarantee payments nearly in real-time and efficiently identify non-compliant employers. Indeed, some have already been questioned about their superannuation compliance because of their STP reporting. In such a tightened regulatory environment, it would be wise to eliminate pre-existing SG liabilities and start with a clean slate.
As always, identifying and disclosing non-compliance is more cost-effective in time and money than having to deal with an ATO audit, especially so given the generous terms on offer during the Amnesty. Therefore, employers that have or suspect to have outstanding SG liabilities should seek professional advice and conduct a review immediately, as disclosures beyond 7 September 2020 will not be subject to the Amnesty.
The team at Collins Wentworth is experienced in business financial matters. If you wish to know more about how we can assist you, contact us today.
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