On the 31st of July, the ATO released a draft Practice Statement outlining the proposed guidelines that are to apply to the remission of the Part 7 penalty imposed in addition to Super Guarantee Charge (SGC) for late lodgement of SGC statements after the conclusion of the amnesty period.
The Part 7 Penalty can be 200% of the SGC amount. The Part 7 penalty is a penalty on the employer for not promptly disclosing to the Commissioner where they have an SG shortfall. It is NOT a penalty on the employer for failing to meet their SG obligations.
The Part 7 penalty will not apply to eligible disclosures made within the SG Amnesty period (You can read more about the SG Amnesty here)
The Part 7 penalty may apply after the amnesty period or to disclosures that do not qualify for the amnesty. However, The Commissioner has an ability to remit in part or in full the Part 7 penalty.
What happens if an employer fails to voluntarily disclose their SGC liability in the Amnesty period?
Employers who fail to voluntarily disclose their SGC liability for the amnesty period (for the period 1 January 1992 to 31 March 2018) will be disqualified from the amnesty and will be subject to the Part 7 penalty. For these SGC amounts, the ATO cannot remit the Part 7 penalty below 100% unless the employer voluntarily comes forward before compliance action is started by the ATO or there are exceptional circumstances that prevented the employer for notifying the ATO.
How will the ATO implement the remission process?
The ATO will automatically impose the Part 7 penalty at a rate of 200%, then follow the four-step remission process outlined below to determine whether it is appropriate to remit the Part 7 penalty down:
What might be considered an exceptional circumstance?
There will be an extremely high threshold that will apply when it comes to establishing an exceptional circumstance and each decision will be made on a case-by-case basis. Some factors that may point towards an exceptional circumstance include:
A natural disaster that directly impacts an employer’s ability to lodge their SG liability (this does not include financial hardship or business downturn).
The inability to lodge due to the COVID-19 pandemic with regards to geographical displacement, resulting in the inability to access business records (the impact does not include financial hardship).
An employer being incorrectly advised by the ATO that they did not have an SG shortfall therefore did not believe they had any SG obligations to lodge.
Severe illness or affliction that rendered the employer incapable of lodging an SG Statement.
The ATO provides various examples of how it will implement its process:
Given that the Federal Government and ATO have been clear about the significant penalties that are to apply once the SG Amnesty period ends, it is pertinent to ensure employers are aware of, and disclose, any SG liabilities for the relevant period before the deadline of 7 September 2020.
Similarly for any SGC liabilities or non lodgement of SGC statements that do not qualify for the SG amnesty (e.g. SGC occurring in quarters after March 2018) PSLA 2020/D1 highlights the importance of an employer reviewing their records to consider if there has been any non compliance and voluntarily coming forward to the ATO to minimise any part 7 penalty.
If you have any queries or would like some guidance please contact the team at Baskin Clarke Priest.