In brief - Employers may benefit from disclosing unpaid superannuation guarantee charge (SGC) liabilities to the Australian Taxation Office (ATO) even if the Federal government's proposed amnesty is not enacted
What is the superannuation guarantee charge?
SGC is payable if an employer does not provide the minimum level of superannuation contributions for its employees. The minimum level of contributions is determined by reference to ordinary time earnings (OTE) up to the maximum contribution base (currently $54,030 per quarter).
OTE are earnings in respect of ordinary hours of work. Earnings in respect of overtime are not OTE.
It is relatively easy for an employer to accidently trigger a SGC liability. Common examples are:
- incorrect treatment of contractors
- leave loading, on-call allowances and shift loading that has no connection with overtime
- employment arrangements where the ordinary hours of work are unclear
- new employees who delay in providing details of their superannuation funds
The SGC is made up of:
- the superannuation guarantee shortfall
- an interest component (10% per annum)
- an administration component ($20 per employee per quarter)
The SGC is not tax deductible and penalties and interest apply if it is paid after the due date. Penalties can be up to 200% but the ATO will normally remit penalties to 75%.
Why voluntary disclosure of unpaid superannuation guarantee charge may be a good idea
On 24 May 2018, the Federal government introduced the Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018
, which contains an amnesty for employers that voluntarily disclose SGC liabilities before 23 May 2019. The Bill has not been passed but the ATO has stated that it will apply the amnesty retrospectively if the Bill is passed.
Under the proposed amnesty:
- payments are tax deductible for those employers that are not exempt from income tax
- the administration component is not imposed, and
- penalties are not imposed
The proposed amnesty will apply to SGC liability for any period from 1 July 1992 to 31 March 2018. Periods after 31 March 2018 are not eligible.
The concessions offered by the proposed amnesty are generous. If the Bill is passed, employers may wish to take advantage of the concessions by making voluntary disclosure.
What if the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill is not passed?
The Federal opposition is opposed to the Bill and some recent media reports suggest that it is unlikely that the Bill will be passed in the government's current term.
Even if the Bill is not passed, employers may find it of benefit to make voluntary disclosure. Although the ATO will not apply the amnesty concessions, it currently has the discretion to fully remit penalties for disclosure made before an audit has commenced. If this discretion is exercised, there is a saving of 75% of the SGC liability.
While the administration component will be payable and SGC payments will not be tax deductible, the potential reduction in penalties may be attractive to employers, especially those that are exempt from income tax because they do not benefit from the tax deductibility of SGC payments.
Employers may therefore want to consider making voluntary disclosure before 23 May 2019.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2022.