Posted on February 10, 2020 by Christabelle Harris
Employees with multiple employers can now opt-out of superannuation guarantee from all but one employer.
Employers are required to pay 9.5% superannuation guarantee for all eligible employees. But what happens if you are an employee with multiple employers? Until recently, these compulsory payments meant some employees risked unintentionally breaching their concessional contributions caps. New laws however provide a potential solution.
Legislation that passed Parliament late last month allows an employee to apply to the Commissioner of Taxation for an employer shortfall exemption certificate to opt-out of the SG system for specific employers. This certificate prevents their employer from having a superannuation guarantee shortfall if they do not make superannuation contributions for the period covered by the certificate.
It’s important to note that the exemption certificate does not require the employer to stop paying SG, it merely protects them if they fail to make SG payments. The employer may choose to continue paying SG – either because they could not reach an agreement with the employee on their total remuneration package once SG is removed, or the administration required to exclude an individual employee is too onerous.
The Commissioner will only issue an employer shortfall exemption certificate where:
- The taxpayer is likely to exceed their concessional contributions cap for the financial year (just because you have multiple employers does not mean you can opt out of SG), and
- At least one employer is paying SG for the employee.
The Commissioner might deny the certificate if it’s not appropriate, the application would significantly reduce the amount of SG by an amount larger than necessary (for example, opting out of SG from the largest of the multiple employers), or where there is a contrived arrangement to take advantage of the new rules.
The due date for the employer shortfall exemption certificate is 60 days before the first day of the quarter to which the application relates.
Before applying for a certificate, it’s important to understand the impact of opting out of SG. You will need to negotiate your total remuneration package with your employer and the impact of this on your tax position, understand the tax outcomes if you did nothing and exceed your contributions cap, and the impact on your retirement savings over time.
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Posted on February 27, 2020 by Ashley Dawson
On 24 May 2018, the Government announced a 12-month Superannuation Guarantee Amnesty (subject to the passage of legislation) that was to be available for the period from 24 May 2018 to 23 May 2019. This legislation was to provide a once only opportunity for employers to disclose and pay previously undeclared super guarantee (SG) shortfalls without incurring any penalties. However, due to the legislation not passing through parliament prior to the federal election in 2019 it never came into effect.
The government re-introduced SG Amnesty legislation to parliament on the 18 September 2019 as Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019. Finally this legislation has passed through both Houses of Parliament and is just awaiting Royal Assent.
Since this amnesty was announced more than 7000 employers have come forward and declared outstanding superannuation guarantee shortfall amounts for their employees. The ATO believes that there are 7000 more still to come forward.
The employers are still liable to pay the full amount of superannuation guarantee owed to their employees plus interest. But under the Amnesty they will not incur penalties, nor the administration fee of $20 for each quarter that there is a SG shortfall and they can claim a tax deduction for the superannuation, if paid during the amnesty period.
With this re-introduced legislation came some changes to the original amnesty, including the new amnesty period, which still begins on 24 May 2018 and will now end 6 months after the day the bill finally receives Royal Assent.
Eligibility for the Amnesty
To qualify for the amnesty an employer must:
- voluntarily disclose, in the approved form to the ATO, the amounts of SG shortfall within the amnesty period,
- disclose amounts of SG shortfall that have not previously been disclosed,
- the SG shortfall amounts must have been incurred during the disclosure period of starting on 1 July 1992 and ending 31 March 2018, and
- not be subject to an audit or review by the ATO in relation to that SG shortfall amount for the relevant periods
Payment Options
Where possible an employer should pay the SG shortfall amount and the nominal interest directly to their employees’ superannuation fund. Where an employer is not able to pay the SG shortfall amount prior to or with the lodgment of the declaration, the ATO may be willing to work out a payment arrangement to allow the employer to pay off the debt over an agreed time period.
Warning
Employers will not be able to benefit from the amnesty for SG shortfall relating to the quarter starting on 1 April 2018 or subsequent quarters, as these are outside of the disclosure period.
Employers with SG shortfalls, who do not take advantage of the one-off amnesty will face higher penalties should they be subsequently caught – the minimum penalty is 100 per cent of the super guarantee that they owe, which will be payable in addition to the SG shortfall.
If you have an SG shortfall and need help with completing the required documentation to comply with the amnesty please contact our office on (08) 9316 7000.
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