The Government has proposed new laws for a one-off ATO Super Guarantee Amnesty for business owners with unpaid employee super. The 12-month Amnesty will provide business owners with an opportunity to wipe the slate clean, and avoid super penalties. This is relevant for any employee super shortfalls over the past 26 years, .
The ATO predicts that $2.8 billion of employee super goes unpaid annually, and the number of employers with unpaid employee super has risen to 17,712. This is a 60% increase over the previous year.
What is Superannuation Guarantee Charge?
Amongst other taxes like GST, PAYG and payroll tax, contributing to your employee’s superannuation is a legal requirement that you must pay if operating a business. You must pay this into your employee’s superannuation fund at a rate of 9.5% of their gross wages.
When superannuation is not paid by the quarterly due date, it becomes payable to the ATO as a Superannuation Guarantee Charge (SGC). This charge includes:
- The initial Super Guarantee (SG) amount calculated on employees’ wages or salary
- Interest on Super Guarantee, currently 10%
- Administration fee of $20 per employee, per quarter.
An additional penalty may be imposed on you for failing to provide an SGC statement in assessing the SGC liability.
To make matters worse, your business will not be entitled to a Tax Deduction for the employee’s superannuation or the SGC liability.
How does the Superannuation Guarantee Amnesty work?
The ATO actively identifies non-compliant businesses through superannuation guarantee reviews and audits. Following recommendations by the Superannuation Guarantee Cross-Agency Working Group in its March 2017 report, the Government introduced draft legislation proposing a one-off 12 month amnesty period. The Amnesty allows business owners to report their unpaid employee super and nominal interest to the ATO without further penalties.
The Amnesty runs from 24 May 2018 to 23 May 2019. To be eligible employers must:
- Voluntarily disclose their unpaid employee super debts within this period.
- Not be subject to an ATO SGC audit for the respective periods.
Additionally, the employee super component of SGC liability made during this period will be tax deductible. This alone is a massive incentive for you to get your unpaid employee super in order.
How to access the ATO Super Guarantee Amnesty
During the Amnesty SGC liabilities can be disclosed to the ATO in two ways:
- If you are paying the debt in full direct to the employees’ super funds, use the SG Amnesty fund payment form.
- If you cannot pay the debt in full use the ATO Super Guarantee Amnesty payment form and enter into a payment arrangement
What if you cannot afford the ATO Payment Plan?
Given the nature of this initiative, the ATO is likely to be supportive of reasonable proposals for a payment arrangement. However, if you have a large unpaid employee super debt, you could struggle to meet the ATO’s terms for a payment arrangement. In this case you should consider:
- A tax debt loan to pay the debt in full, or otherwise make an up-front contribution to help secure a payment arrangement.
- A business turnaround or restructure to help your business generate sufficient cash flow to pay the debt in full.
If you cannot pay your SGC debt once reported, the ATO can pursue the company directors personally for the debt. If you expect to be in this situation after reporting your unpaid employee super debt, it may be more appropriate to seek insolvency advice about voluntary administration or liquidation. We recommend using our experienced partner firm, Revive Financial for insolvency advice.
What if you fail to report or pay unpaid employee super during the Amnesty?
Non-compliant employers may face consequences if they do not rectify their superannuation situation during the Amnesty period.
- Will face additional non-deductible penalties and charges to a minimum of 50% on top of any superannuation owed.
- Will not receive a tax deduction for the SGC payments you make.
- May face court orders to pay unpaid employee super, which could result in criminal proceedings.
- Are likely to be personally liable for the company’s unpaid employee super debt under a director penalty notice
The ATO may:
- Conduct an SGC audit and raise assessments.
- Deduct money from your bank account under a garnishee notice.
- Issue a statutory demand to commence company windup proceedings.
How will the ATO know if you have an unpaid employee super debt?
The ATO are responsible for investigating cases of unpaid super to employees. Unfortunately, there is little escaping the ATO if you have a super or tax debt. Some of the ways the ATO will be increasing their activity in this area, are through:
- Employees being more active in complaining to the ATO if they suspect their super is not paid.
- Single touch payroll commenced on 1 July 2018 requiring employers to submit their payroll reports to the ATO when processed.
- Super funds must report contributions to the ATO, on a monthly basis.
If you have been using employee super to fund your business, it is unlikely that you are paying yourself super. Or perhaps you haven’t been paying yourself a wage. It’s time to deal with your super or tax debt, and take action immediately.
We see plenty of opportunities for proactive business owners to improve their businesses and adopt positive strategies. Get in touch with Tax Debt Resolved and discuss your options today.
For more information on tax debt solutions, check out our tax debt page.