Employers get amnesty on unpaid super
Unpaid super entitlements continue to be an issue, with nearly $3 billion of superannuation entitlements not being paid by employers each year, but employers will get some relief with the government announcing the introduction of the Superannuation Guarantee Amnesty.
These new measures will provide businesses the chance to rectify any unpaid employee superannuation guarantee (SG) while avoiding some of the penalties for late payment. It’s an opportunity for employees to get their rightful super payments as well as for businesses to avoid costly fees and will run from until May 23, 2019.
Super Guarantee (SG) is compulsory
Super is money you pay for your workers to provide for their retirement.
Generally, if you pay an employee $450 or more before tax in a calendar month, you have to pay super on top of their wages.
The minimum you must pay is called the super guarantee (SG):
- the SG is currently 9.5% of an employee’s ordinary time earnings
- you must pay the SG at least four times a year, by the quarterly due dates
- your super payments must go to a complying super fund – most employees can choose their own fund
- if you don’t pay the SG on time, you may have to pay the super guarantee charge.
(referred from ATO website: https://www.ato.gov.au/Business/Super-for-employers/ )
What does it mean for businesses?
If you have unpaid SG for an employee between July 1, 1992, and March 31, 2018, you have until May 23, 2019, to disclose these to the ATO.
Employers who voluntarily disclose previously undeclared SG shortfalls during the Amnesty and before the commencement of an audit of their SG will:
- not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
- be able to claim a deduction for catch-up payments made in the 12-month period.
If you have large amounts of unpaid SG, then you can potentially save thousands of dollars in penalties.
What does it mean for employees?
For employees, if your employer makes a payment into your fund for unpaid SG through the superannuation guarantee amnesty, then you’ll have to be wary of breaching your contributions cap.
This amount will automatically be counted towards your contributions for the year and, especially if there is a large outstanding amount, can have large tax ramifications. To avoid this, you will need to apply for the Commissioner’s Discretion to have the amount paid under the amnesty disregarded from your allowable contributions.
As with any legislation, there is plenty of qualifying criteria. But for this one, there is a big issue as the amnesty is currently only proposed legislation and at the time of writing is before the Senate. If the bill is not passed, then the reduction in penalties and fees will not be taken into consideration and any super payments made to cover the previous shortfalls will not be tax deductible.
Provided the legislation is passed, there are still eligibility requirements. The amnesty is only available for SG shortfalls disclosed during the amnesty period, May 24, 2018, through to May 23, 2019. It does not cover any previously disclosed shortfalls, nor does it cover any
periods for which your SG is being audited.
Sydney Morning Herald, Unpaid super: How the amnesty could affect you, By Olivia Maragna on 29 August 2018
Australian Taxation Office (ATO) website, Proposed Superannuation Guarantee Amnesty,
The material and opinions in this article are those of the author and not those of AP Group. The material and opinions in the article should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests or resort to professionals for assistance.