The superannuation guarantee (“SG”) is an important part of our taxation system, but it can be very complex. Mistakes in the calculation or payment of SG do happen, and the consequences of this can be extensive and ultimately quite expensive for employers.
As such, in May 2018, the Government announced a one-off 12 month Superannuation Guarantee Amnesty (the “Amnesty”). The Amnesty is intended to provide employers with a once off opportunity to disclose SG errors or mistakes to the Australian Taxation Office (“ATO”) without the risk of a penalty.
What are the benefits of the Amnesty?
Outside of the Amnesty, when an SG mistake is disclosed, an employer must calculate the liability therefore payable on all salary and wages of the employee for the period in question (this can include allowances, termination payments, lump sum payments and overtime), instead of what is known as “ordinary time earnings” which is what SG is normally calculated on. On top of this increased SG base, the employer is also liable for interest, administration charges and possibly additional penalties. Normally, none of these amounts are tax-deductible.
However, under the Amnesty, employers who voluntarily disclose previously undeclared SG shortfalls;
- will not be liable for the administration charge or penalties that may otherwise apply to late SG payments; and
- will also be able to claim a tax deduction for these “catch-up payments” made in the Amnesty period.
Am I eligible for the Amnesty?
The Amnesty is expected to be available for voluntary disclosures made between 24 May 2018 and 23 May 2019, and covers all quarters from 1 July 1992 to 31 March 2018 (inclusive). To be eligible for the Amnesty, an employer must:
- Voluntarily disclose amounts of SG shortfall within the 12-month Amnesty period;
- Not have previously disclosed these amounts of SG shortfall to the ATO; and
- Not be subject to an audit of SG for the relevant periods.
In other words, only new disclosures are eligible for the Amnesty.
How would I know if I haven’t paid SG correctly?
SG can be quite complex, and as such it can be easy to make errors in its calculation or payment that result in an SG shortfall. Indicators to look out for that you might have an SG shortfall include:
- Late payments of SG (i.e. later than the 28th day after the end of the relevant quarter).
- Your accounting system (MYOB, Xero, QuickBooks etc) doesn’t automatically calculate SG on ordinary times earnings items such as non-contingent allowances or standard overtime.
- An employee hasn’t provided their superannuation fund details and so you haven’t made an SG payment for them yet.
If any of these indicators sound familiar, or you have any concerns about the status of your SG obligations, keep reading!
Current status with Parliament
The legislation to give effect to the Amnesty was introduced into Parliament on 24 May 2018, and if enacted, will apply retrospectively. Although the ATO has provided significant information on their website and has provided various template forms for employers to complete and submit to make a voluntary disclosure, until the legislation is enacted, the Amnesty is not yet available.
As such, currently, the administration component of the SG charge remains legally payable and deductions cannot be claimed. It is important to note that if the Amnesty law does not pass, you will not be able to receive a refund for payments you have made that were intended to be paid under the Amnesty.
What action is needed?
If you are concerned about the status of your SG obligations, or if you would just like some additional comfort that your SG obligations are being met, we can undertake a “SG health check” for you. This would include reviewing your SG obligations over a certain period and identifying any indicators of errors or problems. If an SG shortfall (or indicators of such) is uncovered, we can assist with you with the process of taking corrective action.
In respect to the Amnesty, we are monitoring the status of the draft legislation very closely and once it becomes law, we will take immediate action in notifying you of this progress.
If you would like an SG health check done for your business, or have any questions on SG or the Amnesty, please feel free to contact your Crowe Horwath adviser. Otherwise, we will be in contact once the Amnesty has been finalised by Parliament.
Courtney van Zyl
Manager – Tax Advisory
Family Office Service Offering
Self Managed Super Fund
Audit and Assurance
Global Business Desk