Super guarantee amnesty helps employers with unpaid SG liabilities

The super guarantee (SG) amnesty, introduced by the government on 6 March 2020, allows employers to disclose and pay any unpaid super guarantee charges (SGC) that they owe for their employees, from quarters between 1 July 1992 and 31 March 2018, with nominal interest but without risk of incurring potentially huge penalties.

Superannuation Guarantee Amnesty Under the amnesty, in addition to relief from the administration component ($20 per employee, per quarter of non-payment) and the Part 7 penalty (minimum 100% and up to 200% of the amounts owed), payments of SG made to the ATO after 24 May 2018 and before 11:59 pm on 7 September 2020 will be tax-deductible.

Employers who have already disclosed unpaid SG to the ATO between 24 May 2018 and 6 March 2020 don’t need to apply or lodge again, however, employers who come forward from 6 March 2020 need to apply for the amnesty. Beyond 7 September 2020, no further applications for the amnesty will be accepted by the ATO.

The ATO has said that it will continue to conduct reviews and audits to identify employers not paying SG for their employees. If identified by the ATO before they come forward, they will not be eligible for the benefits of the amnesty and their payment of unpaid SGC will not be tax-deductible. These employers will be required to pay:

the SG shortfall
nominal interest (10%)
administration component ($20 per employee per quarter of the unpaid period)
Part 7 penalty for non-payment (up to 200% of the SGC – minimum 100% if remission is applicable)
the general interest charge (GIC)

The ATO cannot vary the deadline of 7 September 2020 for making an amnesty application – not even for businesses affected by the 2019–20 bushfires.

ATO example of failure to disclose unpaid SG during the amnesty

Ben owns a salon employing five staff. He sometimes has difficulty paying his employees their SG entitlements. Ben hears about the SG amnesty but decides he doesn’t have time to work out what he hasn’t paid and will sort it out later.

The ATO uses payment data available from super funds and identifies that Ben hasn’t met his SG obligations for all four quarters in 2017.

On 14 October 2020 Ben receives a letter from the ATO telling him they have commenced an audit. They request evidence of super payment for the quarters identified.

Ben goes through his records and discovers he has an SG shortfall. The total SGC payable is $12,800, which includes the SG shortfall, interest and administration component.

Ben remembers the amnesty and phones the ATO to see if he is eligible. The ATO tells him that the amnesty ended on 7 September 2020.

Because Ben didn’t disclose the shortfall during the amnesty period, he has to pay the full SGC amount of $12,800, this includes $400 for the administration component (five staff × $20 × four quarters). The ATO also applies the minimum Part 7 penalty of 100% after remitting it from 200%, adding a further $12,800.

The total amount Ben owes the ATO is $25,600. Ben cannot claim a tax deduction for the SGC of $12,800 or the additional penalty of $12,800.

If Ben had reviewed his records and disclosed the underpayments within the amnesty period he would not have incurred the $12,800 penalty and would have avoided the $400 administration component. In addition, he would have been able to claim a tax deduction for the SGC paid before 7 September 2020.