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      SG Penalties for Employers

      Minimum penalty for employers who ignore the superannuation guarantee (SG) amnesty

      While the SG amnesty is expected to result in historical SGC liabilities being collected, the ATO is now armed with additional information and power that will enable it to target and penalize non-complying employers in the future. The recent measures include:

      • Single Touch Payroll (‘STP’) – with limited exceptions, employers are now required to be reporting tax and superannuation information to the ATO via STP, as and when salary and wages are paid to employees.
      • Member Account Transaction Service (‘MATS’) – under this service, APRA-regulated superannuation funds need to report information via the SuperStream data standard to the ATO about superannuation contributions received throughout the year, at the time the transaction occurs. Note that SMSFs do not report via the MATS. As part of the MATS reporting protocol, employer contributions will be reported to the ATO, including available information to identify the employer making the contribution.
      • Direction orders – the Commissioner now has the power to issue employers with directions to pay unpaid superannuation guarantee (with a failure to comply being a criminal offence) and/or to undertake superannuation guarantee education courses.
      • Director penalty regime – for SGC liabilities that relate to the June 2012 (or a later) quarter, the director penalty regime applies if a company (including a trustee company) fails to pay the SGC in full by its due date. Accordingly, directors can be held personally liable for a company’s unpaid SGC liability.
      • Security deposits – the Commissioner can require a security deposit (by way of a bond, deposit or any other means the Commissioner considers appropriate) for the payment of an existing or future superannuation liability from an entity that the ATO believes may soon cease carrying on a business. Since 1 July 2018, the Commissioner has had the ability to obtain a court order to enforce compliance with this requirement.

       

      If a disclosure is made on or after 8 September 2020 (amnesty period ends on 7 September 2020), the Commissioner’s ability to remit a Part 7 penalty may be limited. In particular, under new S.62(4) of the SGAA, the Commissioner will not be able to remit Part 7 penalties to below 100% of the SGC payable, where the following conditions apply:

      a) The employer is liable to pay a Part 7 penalty for a quarter that started on or before 1 January 2018 (i.e., a quarter covered by the SG amnesty);

      b) Particular information is relevant to the amount of the employer’s SG shortfall for that quarter;

      c) Since the start of the amnesty period (i.e., from 24 May 2018), the employer either:

      • has not disclosed that information to the Commissioner; or
      • only disclosed that information after being informed that the Commissioner was examining, or intended to examine, the employer’s compliance with an obligation to pay the SGC for the quarter; and

      d) By taking that information into account, the employer’s SG shortfall for the quarter exceeds what it would be if that information were not taken into account.

       

      Practically, this means that where an employer failed to disclose an SG shortfall or failed to correct an under-reported SG shortfall under the SG amnesty, once the amnesty period concludes, the minimum penalty will be 100% of the SGC short fall amount.

      On the other hand, the Commissioner will not be restricted in remitting Part 7 penalties (and may potentially remit the entire penalty) in the following scenarios:

      • the Commissioner is satisfied that ‘exceptional circumstances’ prevented the employer from making the disclosure of the historical shortfall or disclosing such information before the Commissioner has notified the employer of an examination into their SG compliance (refer to new S.62(5) of the SGAA);
      • where the SG shortfall relates to a quarter starting on or after 1 April 2018 (i.e., as the SG amnesty does not apply to the June 2018 and later quarters); or
      • the Commissioner has made a decision to remit the Part 7 penalty during the amnesty period.

       

      • Should you have any queries, please contact Tax Ideas Accountants & Advisers on +61 2 83181545
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