Sober facts about SG amnesty under COVID realities

The superannuation guarantee amnesty, proposed even before the last federal election, and resurrected after the LNP retained government, finally commenced on 6 March this year.

However by then the crisis of COVID-19 was starting to be tallied, with Tax & Super Australia even urging the government to re-consider extending the cut-off of 7 September to give employers whose businesses have been impacted by the COVID-19 pandemic time to re-group.

Tax Counsel John Jeffreys said at the time: ““We’re concerned that many employers, including those in the hospitality industry, who have outstanding SG obligations may be too overwhelmed, or simply unable, to manage the amnesty process in the coming months.”

Of course, just then the tsunami of legislative changes that was generated by the coronavirus stimulus measures hit the ATO (not that we have any knowledge that this came into play regarding the SG amnesty), but for whatever reason, the 7 September expiry date has remained in force.

That being the case, businesses that know they may have a liability for superannuation contributions, and who were hoping to apply for the amnesty, should be aware of certain realities that the ATO will be working from.

The first wagon in the circle is that date. The ATO says that any business owner wanting to apply for the amnesty is required, by law, to apply by 7 September 2020. It does concede that it will work with any business owner to establish a payment plan, and that the aim of this is to help businesses continue making payments.

Options will include flexible payment terms and amounts, which the ATO can adjust if a business’s circumstances change, due to, for example, the results of COVID-19 conditions. There is also the option to extend the payment plan to beyond 7 September (the end of the amnesty period). However the ATO says that only payments made up to 7 September will be deductible (our emphasis).

And the ATO goes on to say that if a business is unable (for whatever reason) to maintain payments, “the law requires us to disqualify [your client] from the amnesty and remove the amnesty benefits” (us again). One concession here is that the disqualification will only apply to any unpaid quarters, which the ATO will determine, but it also promises to re-apply the administration component of $20 for each employee included in each disqualified quarter.

And then there is a discretionary penalty, which can be up to 200% of the super quarantee charge. This is known as the Part 7 penalty under Section 62(3) of the SGAA, which can be imposed or waived at the discretion of the Commissioner on a case-by-case basis. The ATO does mention however that a review of “circumstances” (and these presumedly mean such COVID-19 pressures that may come to bear on a business) may result in a Part 7 penalty of zero.

It has issued a draft Practice Statement (PS LA 2020/D1) that gives guidance to ATO staff on considerations to make in deciding on the remission of the Part 7 penalty. This will apply from 8 September, and notes that where a historical quarter is assessed for SGC after the end of the SG amnesty period, ATO officers cannot remit a Part 7 penalty to less than 100% of the SGC unless the employer voluntarily came forward to lodge an SG statement before being notified of any compliance action, or where untoward circumstances stopped the employer from lodging an SG statement during the amnesty or before the employer was notified of ATO action.

PS LA 2020/D1 also states that the 200% penalty will stand where the employer has either demonstrated repeat disengagement or the ATO has formed an opinion that the business has engaged in a “phoenix” arrangement.

Regarding the possibility of extending the amnesty period, the ATO states: “We acknowledge the difficult times the community has been experiencing recently with COVID-19 and the 2019-20 bushfires,” the ATO says. “However, the law does not allow us to vary the due date for lodgment of an amnesty application.”

The ATO’s emergency support Infoline number is 1800 806 218.

Website Comments

  1. Duncan Smith
    Reply

    Some/many micro businesses pay SG for staff but not for the Salaried Owner/Sole Director.
    This may have occurred for many years.

    I understand that the closely held concession exemption from STP has been extended to 30 June 2021.

    A Company Tax Return has a box for Salary and a box for Super.
    In many cases, a closely held company will have a figure in the Salary box but not in the Super box.
    Why would the ATO not be able to data match the non payment of Super on receipt of the Company Tax Return?

    Say a Director is the only employee and has a Salary of $100,000.
    There could be many years of unpaid SG and the amount owing might be say $9500 by say 10 years plus interest (plus fines etc).

    In the notes to the Accounts, I have the Director sign that SG has not been paid.
    What are the requirements of Tax and Super Australia/Industry Bodies in regard to members advising Business Owners that SG has not been paid?

    What responsibility does an Agent have under TASA to advise a client of the SG Amnesty?

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