Under amending legislation passed in Parliament this week, employers who have failed to comply with their super guarantee (SG) obligations will have an amnesty for another six months to come forward and pay their workers’ SG shortfall without ATO penalties.
The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 amends the Income Tax Assessment Act 1997 and Superannuation Guarantee (Administration) Act 1992 to provide employers a one-off amnesty for six months after the bill is enacted, expected in May.
Employers who voluntarily disclose their SG non-compliance to the ATO and pay the SG shortfall during the amnesty, can claim income tax deductions for the SG amounts disclosed; will not be charged any fees; and will not be subject to any further penalties.
The amnesty was first announced on May 24, 2018, the day the original bill with the amnesty measure was introduced, which lapsed when Parliament was dissolved at the call of the last Federal election. Employers will not benefit from the amnesty for SG shortfalls from the quarter starting on April 1, 2018, and subsequent quarters.
The amnesty does not apply to employers who have already been informed by the commissioner ATO is examining, or intend to examine, their SG compliance.
Under current legislation, employers who fail to pay SG must pay an SG charge (SGC) to the ATO, comprising payment of the SG shortfall, 10% nominal interest, and a $20 administration fee per person per quarter of unpaid SG.
In addition to the SGC, employers who fail to comply with their SG obligations are liable for penalties of up to 200% of the SGC amount for failing or refusing to provide required statements or information, imposed at the commissioner of tax’s discretion.
An ATO source told Insurance Review, at present, a worker’s unpaid SG could take several years to resolve and in some cases, unpaid super could not be retrieved at all if employers were unco-operative.
Support for bill ‘mixed’
In September 2019, the bill was passed to the Senate Economics Legislation Committee, which conducted an inquiry into the legislation. The committee found support for the bill was “mixed” among inquiry participants.
The bill passed without Labor support but with the backing of Centre Alliance on the promise the government would consider Labor’s proposed changes to the national employment standards, giving workers the right to chase employers directly for unpaid super rather than going through the ATO.
Industry Super Australia (ISA), which did not support the bill, questioned ATO’s effectiveness in recouping unpaid SG. In its submission to the Senate inquiry ISA said that, despite the “significant penalties” imposed on employers who did not meet their SG obligations, ATO had not imposed a maximum 200% penalty on any employer.
ISA research showed the problem of unpaid super had increased by 25% in 3 years since 2013-
2014 and in 2016-17, 2.85m Australians had been short-changed $5.9bn in super entitlements.
The new legislation gives the ATO powers to direct employers to pay unpaid super. Failure to comply with ATO directions to pay SG can result in fines of up to $10,500 or 12 months imprisonment.
Once the amnesty period is over, penalties for non-compliance will be at least 100% of the SGC for any quarter covered by the amnesty.
Increased penalties should encourage use of amnesty: FSC
The Financial Services Council (FSC) supported the bill and said in its submission to the inquiry the increased penalties for employers who chose not to make voluntary disclosures during the amnesty, should encourage the use of the amnesty to pay the SG shortfall.
FSC said other reforms, eg the single touch payroll (STP) would make it harder for employers to be non-compliant with their SG requirements in the future.
The STP applies from July 2019, to all employers, including those with one employee or more, making it mandatory to report employees’ payroll information, including salaries and SG payments, to the ATO each time they are paid through STP-enabled software.
The Senate committee said it was encouraged by the latest ATO figures which showed the SG gap had significantly decreased on previous years to about $2.3bn.
“This decrease in the (SG) gap can be attributed, at least in part, to the more than 7,000 employers that have come forward to voluntarily disclose historical unpaid (super) since the one-off amnesty was first announced,” it said.
In the committee’s view, that “significant level” of disclosure, even before the legislation was enacted, was “a strong indication” the amnesty would achieve its projections to recover more than $230m in super for employees who would have otherwise missed out.