Estimates of the problem vary. Official ATO figures place the annual unpaid super “gap” at $3.26 billion (based on 2015–2016 data) before factoring in ATO intervention, or 5.7% of the super that should be paid by employers. However, some argue the problem is bigger, with Industry Super Australia placing the gap closer to $6 billion, affecting 2.85 million workers.
The extent of the problem can be obscured by “black economy” activity where workers are paid cash-in-hand, and also “sham contracting” where workers are misclassified as independent contractors to avoid paying entitlements like super contributions.
What about past unpaid super you might already owe? You may have previously heard about an “amnesty” for coming forward and voluntarily disclosing historical underpayments of SG contributions without incurring penalties. After many hiccups with implementing this policy in 2018 and 2019, the returned Coalition government has finally taken steps to relaunch the policy. Under proposed legislation currently before parliament, the amnesty will work as follows:
• The scheme applies to any unpaid super you still owe dating back to 1992 until the quarter starting on 1 January 2018.
• To qualify, you must not only disclose but also pay the outstanding contributions – including interest.
• You must make this disclosure to the ATO before it begins a compliance audit of your business (or informs you it intends to audit you).
• If you qualify, the ATO will waive certain penalties that would usually apply. You will also be able to deduct your catch-up payments, provided they are made before the amnesty ends.
If you don’t come forward and you’re later caught out, the ATO will be required to apply a minimum penalty of 100% on top of the amount of unpaid super you owe (although this can be as high as 200%). Additionally, catch-up payments made outside of (or after) the amnesty are not deductible.
The timing of your disclosure is important. The proposed new amnesty will cover both previous disclosures made since 24 May 2018 (under the old amnesty scheme that the government failed to officially implement) and, importantly, disclosures made up until six months after the proposed legislation passes parliament.
While there’s a risk that the amnesty legislation may never pass parliament – which would mean the protections against ATO penalties for disclosing businesses wouldn’t be guaranteed by law – businesses do face significant penalties if they’re caught by the ATO, with or without an amnesty in place.
Even in the event that the amnesty does not become law, the ATO would still look favourably upon businesses who make voluntary disclosures. This may be a basis for negotiating a partial waiver of penalties.
If you would like to know more please contact one of our accountants on 07 4639 1099 or come in and see us at 14 Russell Street Toowoomba.