In anticipation of the conclusion of the superannuation guarantee (SG) amnesty (discussed here) on 7 September 2020, the Australian Taxation Office (ATO) has released a draft Law Administration Practice Statement PS LA 2020/D1 (PSLA 2020/D1) in relation to how, post amnesty, the ATO officers may exercise their discretion to remit Part 7 penalties.

It is important to note that the Part 7 penalty is not a penalty on the employer for failing to meet their SG obligations. Rather, it is a penalty on the employer for not promptly disclosing to the Commissioner where they have an SG shortfall. A Part 7 penalty is automatically imposed at a rate equal to double the SG charge payable by the employer for the quarter (that is, 200% of the SG charge).

As a result of changes introduced with the amnesty, for SG assessments after 7 September 2020, the ATO’s ability to reduce that penalty below 100% of the SG has been limited to 2 situations:

• The employer voluntarily lodged a SG statement prior to being notified of any ATO compliance action; or

• Exceptional circumstances prevented the employer from lodging the statement during the amnesty period or before the ATO commenced compliance action.

ATO case officers have the discretion to remit the Part 7 in part or full in the 2 circumstances listed above or down to 100% if those circumstance don’t apply. PSLA 2020/D1 sets out a four-step penalty remission process which ATO staff must follow in deciding whether it is appropriate to remit the Part 7 penalty down from 200%:

• Step 1: Set a base penalty based on the employer’s attempt to comply with their SG charge obligation

• Step 2: Determine any penalty uplift based on the employer’s compliance history

• Step 3: Identify any mitigating facts and circumstances

• Step 4: Identify any exceptional circumstances that prevented lodgement of an SG statement prior to notice of ATO compliance action

PSLA 2020/D1 confirms that COVID-19 related difficulties will only point towards a finding of exceptional circumstances if an employer’s ability to lodge has been impacted. That is, the pandemic would need to have directly impacted their ability to lodge, for example, if the employer was displaced interstate or overseas and unable to access business records. The financial impact alone will not be sufficient.

When finalised, PSLA 2020/D1 will apply from 8 September 2020, following the conclusion of the SG amnesty.

To discuss further or for more information please contact:

Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au

Phil Broderick
Principal
T +61 3 9611 0163  l M +61 419 512 801   
E  pbroderick@sladen.com.au