In the early 1990’s The Australian Government passed a law , whereby employers were to pay a % of the Employees ordinary earnings into a separate retirement savings fund called Superannuation. The current rate is 9.5 % which means if you earn 1,000 a week your employer has to deposit 95 Aud towards super. So while the amount may seem small , it really adds up over the weeks, months and years that you work during your life.
Unpaid super contributions are one of the biggest issues contributing to the shortfall in retirement funds. As the population grows older more and more people are facing the difficult decision to scale down their lifestyle due to lack on sufficient funds in their super and or other investments.
Unpaid super contributions are basically super that an employee earned , but was not paid into his super. Even if the amount is small initially it can lead to shortage of hundreds of thousand in the final balance avail at the time you attain retirement age. Just to put things in perspective the shortfall in super paid is approximately 6 billion per year.
The government introduced a super guarantee (SG) amnesty (the amnesty). The amnesty allows employers to disclose and pay previously unpaid super guarantee charge (SGC), including nominal interest, they owe their employees, for quarter(s) starting from 1 July 1992 to 31 March 2018. The Bill incentivise’s employers to come forward and do the right thing by their employees by paying any unpaid superannuation in full.
Under the Superannuation Guarantee Act 1992, if an employer has Superannuation Guarantee shortfalls for a quarter, he is liable for the Superannuation Guarantee charge comprising: the total of the employer’s individual Superannuation Guarantee shortfalls for the quarter; the nominal interest component for the quarter (10 per cent calculated from the start of the quarter); and $ 20 per employee per qtr as the administration component.
To avail the amnesty, businesses must apply to the ATO before the amnesty expires on 7 September, and either pay the unpaid amounts of superannuation in full with interest , due to Covid 19 ATO may allow a payment plan to do so in the future.
Benefits of the Super Amnesty Scheme
There are two major benefits to employers if they avail of this amnesty, payments made during the amnesty can be claimed as tax deduction and, they will be exempt from penalties under part 7 of the Superannuation Guarantee Act 1992 for the period covered under the amnesty.
Commissioner may exercise their discretion where the concessional contributions cap is exceeded due to a payment under the amnesty scheme.
In addition Employers can request ATO for a payment plan , due to Covid 19 situation.
Consequences of not declaring under amnesty
- Employer is still liable to pay the superannuation shortfall.
- 10% Nominal interest on the shortfall.
- Administrative charge of $ 20 per person per Qtr.
- Penalty upto 200% of the super guarantee charge (Minimum 100%).
- Any the super Guarantee Charge will not be tax deductible, and payment plan may not be available.
How to Apply for the Super Amnesty Scheme
Download the approved form and submit one form for each qtr that you have a shortfall, detailed instructions are on the form.
After the deadline expiry it is expected that ATO may increase compliance activity. It is expected that appox 860,000 business may receive letters from the ATO reminding them of their unpaid superannuation obligations.
Also no extension is expected on this deadline. So we suggest all businesses to do the right thing and avoid the sword hanging on their heads.