As discussed here and here, the super guarantee (SG) amnesty ended on 7 September 2020. The SG amnesty allowed employers to disclose and pay previously unpaid SG charge, including nominal interest, for the quarters between 1 July 1992 to 31 March 2018 without incurring the administration component or Part 7 penalties. In addition, payments of SG charge made to the ATO under the amnesty were tax deductible to the employer.
In anticipation of the conclusion of the SG amnesty, the ATO released a draft law administration practice statement (PSLA), in relation to how, post amnesty, the ATO officers may exercise their discretion to remit Part 7 penalties. This draft PSLA was subsequently finalised in PSLA 2020/4.
The ATO approach to remission of Part 7 penalties as set out in PSLA 2020/4 was harsh and inflexible. The SG legislation applies an automatic 200% penalty (ie, 200% of the SG charge), and PSLA 2020/4 directed ATO officers that they were not to remit Part 7 penalties below 100% of the SG charge except in the most exceptional circumstances.
Of particular concern was that PSLA 2020/4 did not appear to cater for the difference in circumstances between, for example, an employer with a great compliance history who inadvertently made SG payments a couple of days late, and repeat offenders with poor compliance history and little regard for their SG and overall tax obligations.
In response to concern from industry and employers, the ATO has now released a draft PSLA, PSLA 2021/D1, which sets out the ATO’s revised administrative approach to remission of Part 7 penalties. When finalised, PSLA 2021/D1 will replace PSLA 2020/4.
Importantly, section 7 of PSLA 2021/D1 notes that an employer should be considered for a penalty relief arrangement (ie, where the employer is provided with additional remission in conjunction with a direction for education) where they have a turnover of less than $50 million and they:
took voluntary action to comply with their obligation to lodge SG statements;
do not have a history of lodging SG statements late;
have lodged no more than four SG statements after the lodgment due date in the present case;
have no previous SG audits where they were found to have not met their SG obligations; and
have not previously been provided with penalty relief.
This represents a significant change in approach from PSLA 2020/4 (remission below 100% only in the most exceptional of circumstances) to PSLA 2021/D1 (full remission of penalties possible where there is overall good compliance behaviour).
PSLA 2021/D1 also highlights the importance of early engagement with the ATO throughout the SG investigation and audit process, as cooperation and genuine attempts to comply with SG obligations will now be explicitly recognised through the principles of PSLA 2021/D1. It also reinforces the need to lodge SG charge statements where contributions will be late (eg because of lockdowns or poor trading conditions) and that the outstanding SG charge can then be paid over time.
For further information please contact:
Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au
Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au
