ATO urged to adopt educative SG approach post-amnesty
A lack of clarity around what constitutes unpaid superannuation could see SG employers that have made late SG payments hit with unexpected penalties once the SG amnesty ends, warns a technical expert.
At the end of last month, the ATO released Draft Law Administration Practice Statement PS LA 2020/D1, which contains proposed guidelines for how the commissioner will approach Part 7 penalties in relation to SG matters once the SG amnesty has finished.
It has invited the industry to comment on the draft practice statement up until 28 August 2020. The practice statement is intended to apply from 8 September 2020.
Insyt chief executive Darren Wynen said the practice statement, in his view, goes into further detail than what the ATO’s website guidance does on late payment of SG.
Mr Wynen said PS LA 2020/D1 makes it clear that an SGC obligation can arise where the employer pays late.
The PS LA 2020/D1 states that the “Part 7 penalty is not a penalty on the employer for failing to meet their SG obligations — it is a penalty on the employer for not promptly disclosing to the commissioner where they have an SG shortfall. No penalty applies where the SG statement is lodged before the lodgement due date.”
He noted that the ATO material and recent guidance issued by the Assistant Treasurer all refers to “unpaid superannuation”.
However, Mr Wynen said there are concerns that the definition of “unpaid superannuation” is not entirely clear, particularly for employers, who could be forgiven for thinking that this refers to the band of employers who simply don’t pay SG, rather than those who pay late.
“I deal with a lot of SG employers who are subject to audit and I can tell you they have no idea of the implications of paying super late and not lodging SG forms on time. They don’t understand it and they don’t get it,” he said.
“There is no material at all anywhere that I am aware of on the ATO’s website saying ‘unpaid superannuation’ includes situations where you have not paid your SG obligations on time and not lodged an SG statement with us by the due date.”
Mr Wynen said the explanatory materials accompanying the amnesty legislation and the ATO materials do not sufficiently explain the significance of what paying late means, and that employers in this situation may want to come forward while the amnesty still exists because they have an SG shortfall.
“Further, the ATO has only undertaken extensive SG audit activity since the advent of STP and event-based reporting, so employers never really knew (since 1993) of the implications of paying late,” he noted.
“I therefore disagree with the ATO’s strict approach adopted in the ruling on the basis that it has not undertaken sufficient education of employers to explain the meaning of ‘unpaid super’.”
In comments submitted to the ATO, Mr Wynen urged the ATO to change its approach in the practice statement by stating that it will adopt an educative approach for 12 months, to ensure that employers understand the significance of paying late and not lodging an SG statement, and thereafter adopting the strict approach discussed in the practice statement.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
