SGC Amnesty – the clock starts…
As all employers (should) know, failing to contribute the minimum 9.5% of an employee’s “ordinary time earnings” (“OTE”) to super by the 28th day of the second month after the end of each quarter results in the Superannuation Guarantee Charge (“SGC”). SGC doesn’t need to be assessed to become due. Once that date is missed, either purposely or by accident, or the amounts contributed aren’t sufficient, the employer automatically has an SGC liability.
SGC is calculated on total salary or wages (rather than OTE, which is typically less) and includes an interest component of 10% and a $20 administration fee. Penalties of up to 200% of the amount outstanding can arise in cases of serious breach.
Perhaps worst of all, SGC is not tax deductible, unlike regular contributions made on time.
It does not matter if your employee has agreed to forgo super, or if they’re a family member. If they’re an employee (or deemed to be one, even if they don’t think they are) then SGC will apply.
In May 2018 the Federal Government announced a time-limited SGC “amnesty” as part of Budget’s “Tax Integrity” measures.
The Treasury Laws Amendment (Recovering Unpaid Superannuation) Act 2020 received Royal Assent and became law on 6 March 2020.
The amnesty encourages employers to come forward and disclose unpaid superannuation by:
- allowing a tax deduction for the SGC payable;
- removing penalties; and
- waiving the $20 (per employee, per quarter) administration charge.
It only applies until 6 September 2020, and only where the employer has not already been informed that the ATO is examining (or intends to examine) the employer’s existing SGC compliance history.
Also, the amnesty is available for shortfalls in the quarter ended 31 March 2018 and earlier (right back to the introduction of the SGC in 1992).
Perhaps the most “encouraging” feature of the amnesty is that once it ends, the ATO will be unable to remit penalties below 100% (i.e. double) the outstanding SGC amount – even if the employer has taken reasonable care, or has a reasonably arguable position.
Many are expecting the ATO to really ramp up its enforcement action following the end of the amnesty, given the introduction of single touch payroll and perhaps a growing need to heed its ever-present mandate of raising revenue.
Munro Doig’s experienced tax and superannuation lawyers have helped many employers with their outstanding SGC liabilities, successfully objecting and appealing SGC assessments and negotiating palatable outcomes.
Feel free to give us a call on a no-obligation basis to discuss whether the amnesty might apply to you.