The Commonwealth Government has announced a 12-month amnesty for employers to self-report underpaid superannuation amounts, during which period the usual penalties for underpayment (non-deductible payments and administrative penalties) will not apply. The amnesty period ends on 24 May 2019.
Employers are usually required to contribute an amount equal to 9.5% of an employee’s ordinary time earnings to a superannuation fund for the employee. Superannuation contributions are generally deductible to an employer.
Where an employer fails to make the necessary superannuation contributions for an employee within a required statutory timeframe, the employer is liable to pay the superannuation guarantee charge.
The superannuation guarantee charge consists of the amount of the unpaid superannuation contributions, an administration component ($20 per employee per quarter) plus interest. A penalty of up to 200% of the unpaid superannuation can also apply – however, the ATO can reduce the penalty to between nil to 75% depending upon the circumstances.
There is one last kicker to having to pay the superannuation guarantee charge – the superannuation guarantee charge is not deductible – in contrast to the contributions by the employer which generally are deductible.
Under the amnesty just announced, employers who have not complied with their superannuation contribution obligations can come forward and avoid some of the consequences of having to pay the charge. Significantly, if the amnesty is utilised the employer will be able to deduct the superannuation guarantee charge (or contributions used to offset the charge).
The other concessions offered under the amnesty are that the superannuation guarantee shortfall will not include the administrative component, and there will be no penalties imposed on the employer.
The amnesty also has a downside for those that do not take up the offer. Government guidance to the ATO is that, if someone who was eligible for the amnesty chooses not to take it up, this should be taken into account in working out what penalty should later be applied.
To qualify for the amnesty:
- the employer must disclose the superannuation guarantee shortfall within the amnesty period for the first time;
- the ATO cannot have informed the employer previously that it is examining or intending to examine its superannuation guarantee compliance for the particular quarter; and
- the employer must pay the superannuation guarantee charge that was imposed on the disclosed shortfall by the time it is due and payable or enter into and comply with a payment arrangement for the amount.
The amnesty only applies to the quarters between 1 July 1992 and 1 January 2018 (inclusive).
As the amnesty is only open for 12 months and the amnesty will not apply if the ATO has commenced or notified its intention to commence a review of an employer, it is important to act quickly. Now is the time to act if you or your clients have late paid or underpaid superannuation contributions.