Posted on 18/06/2020
Superannuation not only plays a vital role in Australia’s financial system, but also in the quality of lifestyle in retirement for more than 13 million hard-working Australians.*
Established in response to Australia’s ageing population, compulsory superannuation was introduced in 1992 to help people save for their retirement and relieve the financial pressure on Australia’s pension system.
As an employer, it is generally compulsory for you to make superannuation contributions to your employees, on top of their wages and salaries. The minimum you must pay is called the ‘superannuation guarantee’ (SG) and is currently 9.5 per cent of your employee’s base earnings.
While the majority of employers do the right thing, historically some have not paid their super contributions on time.
In fact, the total amount of unpaid super is estimated by the ATO to be approximately $2.3 billion.
“There’s an obligation from employees and the ATO that employers will pay the SG at least on a quarterly basis,” explains Darren Wunderer, Team Leader and Senior Relationship Manager at Statewide Super.
“The timely payment of ongoing contributions can help employees’ super balances grow more quickly, as the money is invested sooner and can accrue earnings.
“Penalties and administration charges for employers not paying the SG on time can be quite significant if the amount of unpaid SG is large, extends back for a number of quarters, and applies to a number of employees.”
If you’ve fallen behind, or miscalculated your super payments to your employees, now could be the time to make amends, thanks to the Government’s superannuation guarantee (SG) amnesty (the amnesty).
Keep reading to find out more about the amnesty, the benefits, whether you’re eligible and how to participate.
What is the SG amnesty?
The amnesty was introduced by the Federal Government on 6 March 2020.
The amnesty allows employers to disclose and pay previously unpaid superannuation guarantee charge (SGC), which is a charge imposed on employers who do not provide the required level of superannuation payments for their employees, including nominal interest, for quarter(s) starting from 1 July 1992 to 31 March 2018, without incurring penalties.
It provides an opportunity for employers to right past wrongs, explains Darren.
“If you’re an employer, and you have made mistakes or missed deadlines, the amnesty is an opportunity to rectify past unpaid SG contributions.”
The ATO Deputy Commissioner, James O'Halloran, described the amnesty as an "unusual" and "first-of-its-kind" opportunity for employers to avoid penalties that late or unpaid SG would normally attract.
"After the amnesty there's an expectation people will have had more than enough warning," he told the Sydney Morning Herald, noting penalties were "likely to be further increased".
It’s important to remember that the ATO continually conducts reviews and audits to identify employers not paying their employees’ SG.
With new advancements in payroll technology and reporting, if the ATO identifies these employers before they come forward, they will not be eligible for the benefits of the amnesty.
In addition to the amnesty, employers should also be aware that the ATO has released a clarification in relation to SG requirements on Annual Leave Loading (ALL) payments, which has caught a number of employers and accountants by surprise.
“Potentially, there are many employers who have been paying their SG on time, but have not been paying correctly on ALL for a number of years,” said Darren.
“Now might be the time to review your records and determine if this may apply to you”.
What are the benefits?
There are a number of benefits of participating in the amnesty.
Firstly, as an employer, you will be able to disclose and pay previously unpaid SGC, including nominal interest, owed to your employees, without incurring the administration component ($20 per employee per quarter) or penalty.
In addition, payments of SGC made to the ATO after 24 May 2018 and before 11:59 PM 7 September 2020 will be tax deductible.
“The tax deduction is an extra incentive. If an employer makes good on unpaid SG, they will be able to claim a tax deduction during the amnesty period, which could be important for their business,” said Darren.
“Ultimately, you’ll be contributing to a better retirement for your employees, if all of their super contributions are up to date and have been paid.”
Who is eligible?
If you want to participate in the amnesty, you need to make sure you meet and fulfil all the following criteria. You must:
- have not 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 quarter(s) starting from 1 July 1992 to 31 March 2018;
- lodge your completed SG amnesty form with the ATO so it is received no later than 7 September 2020.
The amnesty and COVID-19
If you’re an employer who has been hit hard by COVID-19, and still want to apply for the amnesty, the ATO will work with you to establish a payment plan that is flexible to help you to continue making payments.
How to participate and next steps
Before applying for the amnesty, it is important that you review your businesses records, to see whether all your super contributions are in order. You may like to consult with your accountant or adviser to ensure you have accurate and up to date information about your circumstances and any SG you may not have paid.
If you want to participate in the amnesty, you need to apply by 7 September 2020. For information on how to apply for the amnesty, visit the ATO website.
If you’re an employer and have questions about the SG amnesty, your first port of call should be the ATO or your accountant.
Employers with a Statewide Super Relationship Manager are welcome to contact them for guidance and support on the matter.
*Australian Bureau of Statistics May 2020: https://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0
Making amends with the SG amnesty
