Superannuation guarantee amnesty
On 24 May this year, the Federal Government announced a twelve month amnesty for employers to pay any unpaid employee superannuation entitlements for all quarters up to March 2018. The amnesty’s concessions, which are subject to legislation being passed (it is currently before the Senate), include not being liable for penalties which could otherwise apply and being able to claim income tax deductions on catch-up payments.
Once the amnesty is over, the Australian Taxation Office (“ATO“) will significantly increase penalties to a minimum of 50% on top of any superannuation owed. In addition, late superannuation payments and penalties will also be non-deductible for income tax purposes.
What employers need to do
With the amnesty period underway, all employers should review their superannuation payments to confirm that calculations are being made correctly. If any shortfalls are identified, systems can be adjusted and back payments made while the favourable amnesty rules apply and before ATO penalties increase. The review may also identify overpayments resulting in ongoing savings to the business.
The amnesty is a clear precursor to the ATO increasing their super guarantee compliance activities on the back of the introduction of Single Touch Payroll.
Single Touch Payroll
From 1 July this year, all employers with 20 or more employees must transition to Single Touch Payroll (“STP“). STP gives the ATO unprecedented access to employers’ payroll information, enabling them to scrutinise intended superannuation guarantee contributions and dramatically increase their ability to detect instances of non-compliance.
In addition, legislation now before Parliament will give effect to the Government’s Superannuation Guarantee Integrity Package announced on 29 August last year. If passed, the measures will include:
- Enabling the ATO to issue directions to non-compliant employers to pay unpaid superannuation guarantee amounts;
- Introducing criminal penalties for a failure to comply with a direction to pay;
- Allowing the ATO to disclose more information about superannuation guarantee non-compliance to affected employees;
- Extending STP to all employers; and
- Requiring superannuation funds to report monthly on contributions received from employers.
Reasons for Shortfalls
Many employers believe they are complying with their superannuation guarantee obligations when in fact they may be non-compliant. Superannuation guarantee shortfalls occur for a multitude of reasons, including:
- Failing to correctly determine employees’ ordinary hours of work and what payments attract superannuation guarantee obligations and what do not;
- Not correctly identifying all allowances and one-off payments which are subject to superannuation guarantee;
- Not contributing superannuation in relation to some contractors engaged principally for their labour; and
- Making payments later than the due date (i.e. later than the 28th day after the end of each quarter). Even if payments have subsequently been made into the fund, interest continues to accrue at 10% per annum until the shortfall is disclosed to the ATO.
Where to from here
Whilst the amnesty legislation has not yet been passed, the ATO has provided advice online on how to take advantage of the proposed concessions and what to do in the meantime. Employers shouldn’t hesitate as the concessions will not apply once an employer is targeted for a superannuation guarantee audit even if during the amnesty period.