With COVID-19’s devastating impact on the business landscape, it’s easy to forget that time is running out to apply for the SG Amnesty.
However given the ATO has indicated a willingness to negotiate flexible payment plans for employers registered for the amnesty and impacted by the pandemic, it is crucial to remember that the deadline for the SG Amnesty remains the 7th September 2020.
It would be prudent for employers to check if they owe any outstanding super, or have any potential non-compliance with its SG obligations (i.e. failure to lodge an SGC statement for previous late payments of SG contributions) in order to take advantage of this once-only opportunity to catch up with their super obligations before much tougher penalties apply.
This initiative, which is aimed at ensuring employees receive the correct amount of super, has seen over 7000 employers come forward to voluntarily disclose historical unpaid super since it was first announced on 24 May 2018.
With an estimated 7000 employers yet to come forward during this scheme, it is an ideal time to take a look at the SG Amnesty in detail, including what it is, how it benefits employers, who qualifies for it, how to apply for it and what steps advisers and their clients should take next.
What is the SG Amnesty?
The SG Amnesty provides for a one-off amnesty to encourage employers to self-correct historical SG non-compliance dating from 1 July 1993 through to 31 March 2018.
It provides employers with a six-month window until 7 September 2020 to disclose, lodge and pay unpaid SG amounts for their employees. During this period of amnesty employers can claim deductions and not incur administration charges or penalties for historical SG monies owed to employees.
Which employers qualify for the SG Amnesty?
Only employers who disclose an outstanding SG amount to the Tax Commissioner qualify for the amnesty. Employers that have been disqualified from participating in the past are not eligible for the amnesty, nor are those that have previously been informed by the ATO that their SG compliance has been under review.
It’s important to make the distinction that the amnesty only applies to “voluntary” disclosures. This means that the ATO will continue its compliance activities during the amnesty period so if they discover the underpayment first, full penalties may apply.
Should employers consider the SG Amnesty?
If there is a slight risk that an employer may have been non-compliant with regards to SG contributions or made the SG contributions late but failed to lodge the SGC statement then the SG Amnesty is worth considering as the penalties imposed on employers during this period are not as hefty as they will be after this period ends.
For employers who have outstanding SG obligations, the ability to deduct the SCG, combined with the reduced penalties, could alleviate some financial burden if they take advantage of the amnesty period.
Employers who don’t leverage this amnesty period can face penalties in addition to the SGC amount from 100% to 200% and will lose the ability to deduct the SCG amount.
What if an employer cannot pay their outstanding SGC amount during the SG Amnesty period?
Given the impact COVID-19 has had on the business landscape, the ATO has indicated their willingness to work with employers to establish a flexible payment plan that includes:
Flexible payment terms and amounts which they will adjust if an employer’s circumstances change; and
The ability to extend the payment plan beyond 7 September 2020 (the end of the amnesty period) although only payments made by 7 September 2020 will be tax deductible.
It is important to note that whilst the ATO is willing to be flexible with employers, if an employer defaults on a payment over the course of their payment plan, the amnesty ceases to apply. However, the ATO will:
Only apply the disqualification to any unpaid quarters; and advise employers which quarters are unpaid (in such instances it will re-apply the administration component of $20 per employee included in the disqualified quarter); and
Take into consideration whether special circumstances apply when deciding whether a Part 7 penalty should be applied to a disclosure (potentially resulting in the penalty being reduced to nil).
Are there any contribution tax issues?
Employers that have the capacity to pay on the day they apply for the amnesty and do not have an existing SG charge assessment, may choose to make the contributions of SG shortfall and notional interest directly into an employee's superannuation account. Otherwise the payments must be made to the ATO.
When the ATO remits any unpaid SG amnesty contributions to an employee’s super account, the employee will be able to apply to the ATO to have that contribution exempted from the contribution cap. This concession will not apply if an employer pays the amnesty contributions direct to a super fund.
Where to next?
Given the opportunity to apply for the Amnesty and avoid higher penalties is closing on the 7 September 2020, it’s prudent for employers to check that they don’t owe outstanding super or have not correctly lodged an SG statement where superannuation guarantee payment have been paid late in the past.
If an employer does discover potential non-compliance with its SG obligations, now is the time to take advantage of this once-only opportunity to catch up with their super obligations before much tougher penalties apply.
How to apply for the SGC Amnesty?
To apply to access the amnesty an employer must self-report SG non-compliance to the ATO approved form, which can be found here.
And remember, time is running out as the Super Guarantee Amnesty ends 7 September 2020.
If you have any queries about the SG Amnesty, please do not hesitate to contact the BCP team.