What is the superannuation guarantee amnesty?

By October 15, 2019Superannuation, Tax

You may have heard that the Government has announced proposed laws for an amnesty on unpaid superannuation entitlements for business owners. This is great, albeit very confusing, news. In this post we’ll run through what it means for you.

First up, what is the superannuation guarantee?

This is a piece of legislation that guarantees anyone considered an “employee” for the purposes of the Act to be guaranteed to receive superannuation contributions by anyone paying them for their efforts.

The definition of employee is quite broad and is something we’ve spoken about before. It covers common law employment arrangements which is obvious, but it also specifically includes a few items that may be less obvious such as:

  1. Sole trader contractors being paid wholly or principally for their labour (unless the contract meets the results test), and
  2. A person being paid to (deep breath) to perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills, and
  3. A person who is paid to provide services in connection with any activity listed under (2) above, and
  4. A person who is paid to perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast is an employee of the person liable to make the payment.

If you’re paying someone out of your business and they meet one any of those criteria, or any of the others listed in the Act, then they are considered an employee for superannuation guarantee purposes and you need to make superannuation contributions on that person’s behalf to their superannuation fund at a rate of 9.5% of any payments made.

Note that there are limited exceptions to the above including payments made that are under $450 in a month which won’t require superannuation guarantee contributions to be made.

What’s the deal with the amnesty?

Normally you need to make superannuation guarantee payments during the quarter within which they relate, or no later than 28 days after the end of the quarter. Failure to do so means you need to complete Superannuation Guarantee Charge paperwork, pay an administration fee, pay interest on the unpaid balance and, to top it all off, these amounts will not be tax deductible. Not much fun.

The amnesty seeks to make these amounts all tax deductible which is pretty great. This amnesty is before Parliament (again), so it is not law yet, but if it gets through the “amnesty period” will start on 24 May 2018 and continue until 6 months after the bill receives royal assent. That is your window to get any unpaid superannuation all lodged with the ATO and paid up.

The amnesty only relates to amounts unpaid from between 1 July 1992 and 31 March 2018. Anything after that won’t be covered by the amnesty and will be subject to the usual treatment for late payments (i.e. administration charge, interest payable and it all won’t be deductible). It also won’t cover amounts already declared to the tax office.

That all sounds pretty good … what’s the catch?

The catch is that if you don’t take the Government up on their kind offer to get your affairs in order and they subsequently find out you have unpaid superannuation guarantee liabilities (i.e. after the amnesty is over) then not only will you need to pay the amounts owing plus administration charges and interest and have the amounts be not deductible, but you’re also exposed to significant penalties. These penalties are set to be a minimum of 100% of the total amount payable, up to a maximum of 200%. For example, if you’ve got $10,000 in unpaid super from years back by the time you add on interest and penalties you could be looking at anywhere from $25,000 to $35,000 in debt.

It’s also worth reminding company directors that they can be held personally liable for any unpaid superannuation liabilities (as well as unpaid PAYGW amounts) under the Directors Penalty regime.

So, if you’ve got unpaid superannuation hanging around your balance sheet, or you’re unsure if you’ve been paying superannuation to the right people, why not get in touch today? We’d love to help.

Note: We will keep you updated via our monthly newsletter, Better Business, to confirm when and if the amnesty actually passes into law.