The ATO is cracking down on unpaid Superannuation Guarantee (SG). As a matter of urgency, employers need to ensure compliance in this area.
Exposure draft legislation was recently released which will require superannuation funds to more regularly report directly to the ATO (at least once per month) on SG amounts that have been paid. With increased reporting by the superannuation funds themselves, non-compliant employers will be detected more easily and more quickly by the ATO. The legislation will also introduce criminal penalties for failure to comply with an ATO direction to pay SG (including prison terms of up to 12 months in the most serious of cases).
To complement this crackdown, in April the ATO also released a Fact Sheet explaining its compliance and penalty approach in relation to employer SG obligations. This approach applies to employers who are unable or unwilling to meet their SG obligations to an eligible employee. The ATO states that in deciding what action to take against employers, it takes a differentiated approach depending on what category an employer falls into as follows:
(a) Employers who are not compliant but actively engage with the ATO to become compliant for past unpaid amounts
You will be deemed to have engaged with the ATO where you maintain regular contact with the ATO, provide all information requested and take corrective action when the ATO requests that you do so. Where this is the case, the ATO states that it is unlikely to impose additional penalties provided your business has a compliance history that demonstrates that you have been generally compliant with SG in the past.
(b) Employers experiencing difficulty meeting their obligations
Employers who fall into this category are encouraged by the ATO to contact them as soon as possible if you need assistance to lodge the required documentation (an SG Charge Statement) or to discuss your inability to pay the unpaid superannuation. The ATO does have the discretion to consider waiving – either in part or in full – certain penalties, but only when the employer has attempted to comply and has an otherwise good SG compliance history.
(c) Employers who are able but unwilling to meet their obligations
The ATO advises that it will take firm compliance action if this category of employer fails to engage by not promptly replying to the ATO’s correspondence or not actively taking steps to pay the SG owing. Action taken by the ATO in this instance may include:
- Collecting amounts owed directly from an employer’s bank or third-parties that owe the employer money – garnishee orders
- Collecting amounts owed directly from company directors (making them personally liable)
- Action that may result in bankruptcy or liquidation (such as a bankruptcy notice or wind-up action).
Take Home Message
Armed with increased superannuation fund reporting and beefed up penalties (see earlier), the ATO is targeting non-complying employers. Ensure that you are complying and, where there is a shortfall of SG in past quarters, address this immediately by paying the shortfall and lodging SG Charge Statements where appropriate. In view of the ATO’s recently-announced compliance approach, if your business is having difficulty meeting its obligations, contact the ATO as soon as possible. Failure to engage with the ATO may expose your business and possibly yourself to the ATO’s harshest available sanctions outlined above.