Mar 09, 2020  | Tags: Superannuation

Our Insights

Employers and businesses dealing with unpaid super issues have been thrown a lifeline with the new wage amnesty.

On 24 February 2020, Parliament passed the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019. This provides a temporary amnesty from late payment penalties for employers who have underpaid super guarantee obligations to their employees, dating between 1 July 1992 to 31 March 2018.

The amnesty scheme will run for the next six months until 7 September 2020. It is a call for all employers to come forward and disclose unpaid super now, or risk a bigger punishment down the track.

Here’s everything you need to know about the amnesty. 

How does the amnesty work?

Employers who voluntarily approach the ATO and disclose their historically underpaid super guarantee (SG) obligations will have administration fees and the Part 7 penalty waived. This is under the condition that employers pay the ATO the shortfalls and interest, including the General Interest Charge which is applied to unpaid tax liabilities.

To further aid your payments, you will be able to claim a tax reduction for the shortfall.  Employers who can’t make their payments outright can discusses potential payment plans, although you can only receive a tax deductibility if your payments are made during the amnesty period. It is highly recommended you complete these steps as soon as possible to avoid losing eligibility for the amnesty benefits.

If you are an employer who disclosed unpaid SG prior to the amnesty, during the period of 24 March 2018 and 6 March 2020, you will be exempt from lodging again or applying with a SG amnesty form.

If you are yet to lodge your claim, you must apply for the amnesty and submit your case with the specific ATO form.

The ATO will distribute the underpaid amount to relevant employee’s active super account. 

Can employers still be penalised?

Employers should note that the ATO will still conduct regular audits during the amnesty period, so employers that don’t immediately come forward will lose eligibility for these benefits. They will also risk penalties including SG shortfall, 10 per cent nominal interest, administration component ($20 per employee per quarter) and Part 7 penalty.

What happens after the amnesty period?

After the amnesty period finishes, employers who have still failed to approach the ATO and disclose their underpaid SG obligations will be given higher penalties than before. These fines, on top of an employer’s superannuation shortfall, will range from a 100 per cent minimum penalty to up to 200 per cent.

Case study (provided by the ATO)

Ben owns a salon employing five staff. He sometimes has difficulty paying his employees their SG entitlements. Ben hears about the SG amnesty, but decides he doesn’t have time to work out what he hasn’t paid and will sort it out later.

The ATO uses payment data available from super funds and identifies that Ben hasn’t met his SG obligations for all four quarters in 2017.

On 14 October 2020 Ben receives a letter from the ATO telling him they have commenced an audit. They request evidence of super payment for the quarters identified.

Ben goes through his records and discovers he has an SG shortfall. The total SGC payable is $12,800, which includes the SG shortfall, interest and administration component.

Ben remembers the amnesty and phones the ATO to see if he is eligible. The ATO tells him that the amnesty ended on 7 September 2020.

Because Ben didn’t disclose the shortfall during the amnesty period, he has to pay the full SGC amount of $12,800, this includes $400 for the administration component (five staff × $20 × four quarters). The ATO also applies the minimum Part 7 penalty of 100% after remitting it from 200%, adding a further $12,800.

The total amount Ben owes the ATO is $25,600. Ben cannot claim a tax deduction for the SGC of $12,800 or the additional penalty of $12,800.

If Ben had reviewed his records and disclosed the underpayments within the amnesty period he would not have incurred the $12,800 penalty and would have avoided the $400 administration component. In addition, he would have been able to claim a tax deduction for the SGC paid before 7 September 2020.

What has been the impact so far?

Since the amnesty was initially announced back in 2018, over 7,000 employers have voluntarily come forward. Between now and September, the ATO is expecting at least another 7,000 to approach them. All up, at least $230 million of superannuation is expected to be paid to employees.

Get Advice

If you are an employer with unpaid SG, we strongly recommend you take advantage of this amnesty. Talk to an experienced tax accountant and for financial planning and investment advice, contact your team at Calder Wealth Management. Call us on (08) 8373 3333 to schedule your free initial appointment.

Written by Ben Calder at Calder Wealth Management.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own  circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Information is current at the date of issue and may change.