All the recent publicity over wage theft has highlighted the complexities of paying staff correctly and the super guarantee is no different.
Under super guarantee legislation, employers are required to pay 9.5% of an employee’s ordinary time earnings into a complying super fund. This needs to occur at least quarterly.
However, whether deliberate or accidental, the ATO estimates $2.6 billion worth of super guarantee payments weren’t made between 2011 – 2017. That’s one of the main reasons behind the government’s decision to offer a super amnesty to small business owners.
What is the super guarantee amnesty?
On 24 February, the Superannuation Guarantee (SG) Amnesty Bill passed both houses of parliament. Its introduction means employers who have underpaid or failed to fulfill their SG obligations will avoid penalties if they confess their error to the ATO and then ‘correct the problem’.
‘Correcting the problem’ means paying employees all the SG contributions they are owed including interest.
The amnesty covers all super guarantee underpayments to employees made between 1 July 1992 – 31 March 2018.
The amnesty period began on 24 May 2018 but has taken until now to pass both houses of parliament. It still needs Royal Assent and will continue for a further 6 months once that’s granted.
Already around 7,000 employers have come forward to voluntarily disclose any unpaid SG to staff and it’s expected the amnesty will return approx. $230 million of superannuation to employees.
There’s good news and bad news
By voluntarily admitting underpayment of SG contributions, employers are avoiding penalties of between 100-200% of the value of the unpaid contributions. These penalties are in addition to paying any superannuation shortfall plus interest. This makes the financial burden of ignoring the amnesty significant.
As an incentive, if an employer qualifies and makes a voluntary disclosure to the ATO during the amnesty, they will:
- Be allowed to claim a tax deduction for the SG shortfall payments
- Avoid the relevant administrative fee and penalties
We urge you to take prompt action if you suspect there is any chance you may have miscalculated or incorrectly paid a superannuation guarantee payment to any employee. The ATO is already investigating a number of small businesses and promising to come after them if they fail to take advantage of the super guarantee amnesty.
Impact on staff
No-one likes to feel cheated. So staff who have not received their full superannuation guarantee payments will feel very betrayed by their boss – especially if the underpayments were made through carelessness or as a deliberate act to support business cashflow issues.
That’s why it’s so important to make the most of the amnesty period. If you discover any accidental underpayments and voluntarily disclose this to the ATO, you can maintain control of how you disclose this to your staff. We can certainly help you develop a strategy to minimise the negative impact this information could have on team morale.
We can also assist you with your payroll responsibilities including managing sick leave and holiday entitlements, super guarantee contributions, penalty rates etc.
What should you do?
Your payroll obligations are becoming more complex every year. The superannuation guarantee amnesty and the new payroll record keeping requirements to avoid wage theft provide a great incentive to rethink how you currently manage your payroll.
Managing a business can be tough but you don’t need to do it alone when you have The HR Dept beside you. There’s never been a more important time to ensure your business is complying with its payroll obligations. So get in touch to discuss how we can help you and your business.