A common thread of the insolvency matters that we administer is the late or non-payment of employee superannuation. Additionally, it still staggers us that directors do not know how the Superannuation Guarantee Charge (“SGC”) system works and how to report late super to the ATO.
This lack of knowledge opens up exposure to the Director Penalty regime administered by the ATO and the associated personal liabilities can be substantial.
This article deals with the Superannuation Guarantee Amnesty, which is fast coming to an end on 7 September 2020.
How does the amnesty work?
The amnesty allows employers to disclose and pay previously unpaid SGC, plus 10% nominal interest, that they owe to their employees for the period 1 July 1992 to 31 March 2018. The disclosures do not attract the normal administration fee component (of $20 per employee, per quarter) or other penalties that can be up to 200% of the amount owed.
Additionally, SGC payments made to the ATO before 11.59pm on 7 September 2020 will be tax deductible, which is not normally the case.
The below table is a useful summary:
SGC in relation to amnesty periods are tax deductible
SGC is non-deductible
Late payments offset against SGC will preserve their deductibility
Late payments offset against SGC are non-deductible
No administration fee component
Administration fee component of $20 per employee, per quarter
No exposure to further penalties
Part 7 penalties of up to 200% may apply
The amnesty may be a useful way to get on top of a legacy of unpaid superannuation and a way to address a common source of pressure faced by small businesses. Get in touch with your advisors to learn more.
Effects of COVID-19
The ATO acknowledges that circumstances can change rapidly as a result of the COVID-19 pandemic and can work with employers that apply for the amnesty, but cannot pay the amounts before the deadline of 7 September 2020. The downside here is that the payments made after the deadline lose their tax deductibility.
You can read more from this page on the ATO website: Superannuation guarantee amnesty
About the author
Greg Quin is a Director at HLB Mann Judd Insolvency WA and has been with the team for 10 years. Greg oversees the daily operations of the many insolvency appointments managed by the HLB Insolvency team and looks after the operations of the practice.
If you have any queries about insolvency matters, please feel free to contact Greg on 08 9215 7900, 0402 943 091 or via email to firstname.lastname@example.org.