Employers: What the Superannuation Guarantee Amnesty means for you?

If you’re anything like us, you’ve been eagerly watching for updates on the 12-month SG Amnesty ever since it first announced by the Government in May 2018. 

Since then it’s been a bit of a job to get it across the line, with the bill lapsing when Parliament was prorogued for the 2019 Federal Election and then being re-surfaced (with amendments) in September 2019 after almost a year of uncertainty for employers and people like us, your advisors.  

Earlier this week, the long-awaited bill finally passed both houses of parliament and is now awaiting royal assent. Employers will then get six months to disclose historical non-compliance before tougher penalties apply. 

So, what is the Superannuation Guarantee Amnesty?

The SG Amnesty is a one-off opportunity for you, as an employer, to catch up on underpaid employee superannuation with reduced penalties and also some tax savings for your business. It comes hand-in-hand with other reforms rolled out recently to tackle superannuation compliance such as stronger penalties, including jail time being imposed on directors.  

It gives you a significant incentive to review and get up to date on your historical superannuation contributions and voluntarily disclose any shortfalls between 1 July 1992 to 31 March 2018 (the Amnesty quarters). The benefits of the Amnesty will not be available for SG non-compliance on or after 1 April 2018. 

Advantages for employers who qualify

 If you know you have unpaid super obligations within the relevant quarters, it’s better to be safe than sorry. There are great incentives to voluntarily disclosing, and very tough penalties if you don’t.    

Advantages include:

• No late payment or culpability penalties
• The administrative component of $20 per employee, per quarter, is waived
• SG charge and late contributions are eligible for corporate tax deductions where contributions are made within the Amnesty period
• Contributions can be made directly to the superannuation funds

Am I eligible for the Amnesty?

To be eligible for the Amnesty, an employer must: 

• Voluntarily disclose SG shortfall amounts, relating to any period from 1 July 1992 to 31 March 2018, within the Amnesty period (24 May 2018 to six months after the day the Bill receives Royal Assent); 
• Disclose SG shortfall amounts that have not previously been disclosed; 
• Make the payment of the SG shortfall amount during the Amnesty period; and 
• Not have been previously informed that the ATO is examining (or that it intends to examine) the employer’s SG compliance for the relevant quarter. 

(Tax Banter, 2019)

The clock is ticking

While the start date of the Amnesty is still 24 May 2018 as originally announced, the Amnesty is proposed to end six months after the day the Bill receives Royal Assent (Previously it was to run for only 12 months and end on 23 May 2019).  

If you do not take advantage of this Amnesty, you could be caught out and hit with a minimum 100% penalty on top of the superannuation guarantee owed, and up to 200% for serious cases. Throughout this period, the Australian Taxation Office (ATO) will continue it’s audit and enforcement activity for employers who do not own up voluntarily.  

Senator The Hon Jane Hume says,  “Since the one-off Amnesty was announced, over 7,000 employers have come forward to voluntarily disclose historical unpaid super ..  The ATO estimates an additional 7,000 employers will come forward due to the extension of the Amnesty. This means around $160 million of superannuation will be paid to employees who would otherwise have missed out.'

Common misconceptions

There are a number of areas where the obligation to pay compulsory superannuation is not clear-cut.

The most common mistakes, where well-meaning businesses have inadvertently underpaid compulsory superannuation, are gone into detail in this blog by Cooper Grace Ward. But some examples are;

Not Understanding Ordinary Time Earnings

Some employers have difficulty in understanding what hours of work are ‘ordinary’. Ensure you are well-versed in your employee contracts and awards that are applicable, as annual leave loading can attract SCG payments as it’s considered ordinary time (ATO).

Overtime is not generally ‘ordinary’, but complications can arise around:

• workplace agreements prevailing over an award
• hours are designated as overtime but are paid at the same rate as normal hours
• there is no award or agreement, in which case all hours are ‘ordinary hours’ 

Contractors who are actually employees

Whether an individual is an employee or independent contractor continues to be the subject of many disputes, so best to get clear on that by using this ATO tool.

Deemed Employees

The legislation deems certain contractors to be employees. This applies to genuine independent contractors. The list of deemed employees includes:

• board members
• individuals who work under a contract that is wholly or principally for their labour
• various MPs, members of Legislative Assemblies and other officials
• anyone paid to perform or present any music, play, dance, entertainment, sport, display or promotional activity – and anyone paid to provide services in connection with one of those
• anyone paid to perform services in connection with the making of any film, tape or disc or of any television or radio broadcast.
• For individuals providing professional services, the issue is often whether they are being paid wholly or principally for their labour.

Already reported and paid the fees?

We will keep an eye on developments in this space and keep you up to date. But is it is expected that the ATO will communicate to employers that have already paid the full SGC how they plan to refund the administration component and penalty to those who are eligible for the Amnesty.  Depending on the timing, employers may also need to amend their tax returns to claim a tax deduction for the payment. 

What’s next

With just 6 months to action from date of royal assent, and the suite of reforms to protect SG entitlements, now is THE time to bring your compliance up-to-date, so you can get on with what’s more important; looking to the future and growing your business.

Contact us today so we can help you take advantage of this one-off legislation! 

Other helpful articles: 

• TaxBanter - 'The proposed Superannuation Guarantee Amnesty — reintroduced'
• AccountantsDaily - 'SG Amnesty bill passes Parliament'