Employers who are behind in paying compulsory Super Guarantee (SG) contributions to staff have until 7 September 2020 to come forward and take advantage of an amnesty currently being offered by the Federal Government.
This SG amnesty is a one-off opportunity for employers to disclose and pay unpaid SG including interest, that they owe for their employees.
Employers that take advantage of the amnesty can claim tax deductions as part of the process and will not incur administration charges or penalties. Flexible payment plans can also be arranged.
However, interest will need to be paid on the amnesty contributions paid to employees’ super fund accounts.
The Australian Taxation Office (ATO), which is administering the amnesty, has advised that the costs to businesses which choose not to come forward and take advantage of this “one-off” amnesty opportunity will be “significant”.
The ATO has also advised that: “After the amnesty ends our ability to remit penalties applied as a result of an audit is limited by law [as contained in the Treasury Laws Amendment (Recovering Unpaid Superannuation) Act 2020]. This means shortfalls will have a minimum penalty of 100 per cent applied but can be as much as 200 per cent.”
SG shortfalls for any quarter between 1 July 1992 and 31 March 2018 may be eligible for the amnesty if they have not previously been disclosed or are not subject to a current or previous audit.
To benefit from the amnesty, employers must lodge one approved SG amnesty form for each quarter and complete a declaration form confirming application for the amnesty by 11.59pm deadline on 7 September 2020.
When the SG amnesty was originally announced in May 2018 (with an initial deadline of 23 May 2019, now extended to 7 September 2020) many businesses lodged a super guarantee charge statement disclosing SG shortfalls, with administration charges of $20 per employee per quarter. If already paid, those businesses will be refunded their administration charges under the amnesty if they meet the amnesty criteria.
In a media release on 18 September 2019, the Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume said: “Since the one-off amnesty was announced, over 7,000 employers have come forward to voluntarily disclose historical unpaid super.”
“The ATO estimates an additional 7,000 employers will come forward due to the extension of the amnesty. This means around $160 million of superannuation will be paid to employees who would otherwise have missed out.”
The ATO has further advised that while it acknowledges the impact of COVID-19 and the 2019–20 bushfires, the law does not currently allow for variations to the amnesty deadline date.
Super guarantee (SG) contributions increase
The SG rate will increase from 9.5 per cent to 10 per cent on 1 July 2021.
Further increases are planned – to 10.5 per cent on 1 July 2022; then to 11 per cent on 1 July 2023; to 11.5 per cent on 1 July 2024; and a final increase (under the current law) to 12 per cent on 1 July 2025.
Employees should note when these changes will take effect and check with their employers at these times to ensure the new SG rate has been implemented. Your super fund should also send you information about the changes.
With compulsory SG employer contributions comprising the lion’s share of super contributions paid, these changes to the SG rate are a material improvement in the extent to which Australians retire with higher retirement savings.
Regular contributions to your super account are important as they allow you to build your account balance over time, to be better placed to for dips in investment markets in the short term (such as during COVID-19). It is always worth remembering that super is a long-term investment.
Modelling by Industry Super Australia shows that as a result of the scheduled SG increases, a 30-year-old worker on an average wage would stand to gain more than $85,000 in extra super by the time they retire.
In addition to SG payments paid by employers, employees can also make additional voluntary contributions to their super in the forms of both [i] concessional pre-tax contributions (such as salary-sacrificing) and [ii] non-concessional after-tax contributions (such as personal contributions).
It is important to remember that a cap exists on how much can be contributed to your super each financial year. For 2019/20, irrespective of age or income, the total amount that can be contributed as a concessional pre-tax contribution (e.g. your employer’s SG contributions plus your own voluntary salary sacrifice contributions) is $25,000.
If you are not sure how much superannuation contributions your employer has paid into your super during the year and how much that leaves for you to potentially make additional voluntary salary sacrifice contributions – without exceeding the combined total of $25,000 — your super fund will be able to assist with these calculations.
The current non-concessional after-tax contribution cap is $100,000 for each financial year. However, people under the age of 65 on 1 July in a financial year may be able to contribute in excess of the $100,000 cap up to an amount of $300,000 in a single financial year pursuant to the “bring-forward rule”.
Please note that if your total super balance is over $1.6 million, no further non-concessional contributions can be made in any year.
Other options to add to your super are also available — your super fund will be able to provide you with information about other ways to contribute to your super.
This information is of a general nature only and does not take into account your objectives, financial situation or needs. You should therefore consider the appropriateness of the information and obtain and read the relevant legalsuper Product Disclosure Statement before making any decision.
Legal Super Pty Ltd ABN 37 004 455 789, AFSL 246315 is the Trustee of legalsuper ABN 60 346 078 879.