12 month Superannuation Guarantee Amnesty – to cover shortfalls over nearly 26 years from 1 July 1992 to 31 March 2018, disclosed between 24 March 2018 to 23 May 2019

Superannuation Guarantee Amnesty

From Ashurst Newsletter (Geoff Mann)

The federal government announced a 12 month Superannuation Guarantee Amnesty (the Amnesty) on 24 May 2018. It also introduced a bill giving effect to the Amnesty, the Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018 (the Bill). This will insert a new s74 into the SGC Act, and make various consequential amendments, including to the ITAA97.

Ordinarily, when an employer does not make the minimum superannuation contribution of 9.5% of ordinary time earnings in respect of an employee, they must pay the superannuation guarantee charge (SGC). The charge is made up of:

• the unpaid superannuation guarantee (shortfall) amounts;
• interest on the shortfall (currently 10%); and
• an administration fee of $20 per employee, per quarter.

The ATO may also impose further penalties; for example, a penalty of 25% of the SGC.

Under the proposed Amnesty, if an employer has an undeclared superannuation guarantee shortfall for a time period between 1 July 1992 and 31 March 2018, they may disclose it to the ATO between 24 May 2018 and 23 May 2019. They will need to pay the shortfall amounts and interest, but will not be liable for administration fees or further penalties. They will also be able to claim an income tax deduction for payments of shortfall amounts and interest they make in that 12 month period, whereas the SGC is not deductible for income tax purposes.

The Amnesty is subject to the Bill being passed by Parliament, but once it is law, will operate retrospectively from 24 May 2018. In case the Bill does not pass, employers are advised to wait until the legislation is in effect before disclosing shortfalls.

If an employer fails to disclose a superannuation guarantee shortfall during the Amnesty, they will be subject to a minimum 50% penalty once the ATO discovers the shortfall.

Further, employers cannot use the Amnesty for periods that are under audit for superannuation guarantee compliance.

For which workers must an employer make superannuation contributions?

While the Amnesty runs, employers should take the opportunity to ensure that they have paid any required superannuation contributions.

An employer must pay superannuation contributions for:

• employees, whether full-time, part-time or casual, including company directors and temporary residents in Australia; and
• contractors, if their contract is wholly or principally for labour. A contract is principally for labour if more than half of the value of the contract is for labour. Labour may be physical or mental. Generally, a contract is for labour if it pays for a contractor’s personal performance of labour (eg where payment is made by the hour) rather than for achievement of a result.

However, an employer must only pay superannuation contributions for these workers if they earn $450 or more (before tax) in a calendar month. They also do not need to pay contributions for part-time employees who are under 18 or who perform private or domestic work. Part-time employees mean those who work 30 hours or less per week.

Other obligations on employers

The Amnesty is an opportune time for employers to undertake a review of their compliance with their obligations in respect of other human resources taxes such as pay as you go withholding, fringe benefits tax, payroll tax and workers’ compensation premium calculations.

Employers should be mindful that whether an employer must make payments in respect of employees and contractors varies between these four regimes. The obligations in respect of payroll tax and workers’ compensation premium calculations also vary between the States and Territories.

FJM 14.6.18

Study questions (answers available)

1. Is the announced ‘Amnesty’ for Superannuation Guarantee Charge obligations?
2. Is it for 12 months, from 24 May 2018 to 23 May 2019?
3. Do taxpayers have this 12 month period, in which to report underpayments?
4. Does the Amnesty cover underpayments over a time period of nearly 26 years, from 1 July 1992 to 31 March 2018?
5. Does the Amnesty excuse the taxpayer from having to pay interest on the shortfall, administration fees and penalties?
6. Will payment of the ‘shortfall’ remain non-deductible?
7. Will the Amnesty be available to those being audited for SGC shortfalls?
8. If a taxpayer fails to disclose a shortfall, over the Amnesty period, will the Commissioner’s practices, with respect to imposing penalties, remain the same?