Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018 was introduced in the House of Reps on 24 May 2018. It includes the following measures:
- Super Guarantee amnesty – the Bill includes amendments to give effect to a 12-month amnesty, announced by the Government on 24 May 2018 (see para [671] of this Bulletin) to enable employers to self-correct historical underpayments of Super Guarantee (SG) amounts without incurring additional penalties that would normally apply. Date of effect: The amnesty will run until 24 May 2019.
- Super Guarantee opt-out – high-income employees with multiple employers will be able to opt-out of the Super Guarantee regime to avoid unintentionally breaching the $25,000 concessional contributions cap. Date of effect: 1 July 2018.
- NALI to include expenses not incurred – the non-arm’s length income (NALI) rules in s 295-550 of the ITAA 1997 will be expanded so that super funds are taxed at 45% for related-party schemes involving non-arm’s length expenses not incurred (eg reduced interest rates). Date of effect: 1 July 2018, regardless of whether the scheme was entered into before that time.
- LRBAs and total superannuation balance – a member’s share of the outstanding balance of certain LRBAs will be included in the member’s “total superannuation balance” (TSB). Note that the Government has revised its original proposal so that the amendments will only apply to increase the TSB for members who have satisfied a Nil condition of release (eg permanently retired or attained age 65), or for a related-party LRBA between the SMSF and its “associate”. Date of effect: Will only apply to new LRBAs entered on or after 1 July 2018. Refinancing of existing loans entered into prior to that date will be excluded.
Super Guarantee – Govt amnesty for employers
The Superannuation Measures (No 1) Bill 2018 will amend the Superannuation Guarantee (Administration) Act 1992 (SGAA) and ITAA 1997 to give effect to the Government’s amnesty (see para [671] of this Bulletin) to enable employers to self-correct historical underpayments of Super Guarantee (SG) amounts without incurring additional penalties that would normally apply.
The Minister for Revenue, Kelly O’Dwyer, said employers will not be totally “off the hook” and must still pay all SG shortfall amounts owing to their employees, including the nominal interest and GIC (but not the administrative component). Rather, the amnesty will set aside the penalties and fees that are normally paid by employers for late SG payments. Employers that do not take advantage of the one-off amnesty will face higher penalties when they are subsequently caught, Ms O’Dwyer said.
Amnesty until 24 May 2019
The amnesty will start from 24 May 2018 and run until 24 May 2019. It applies to SG shortfalls as far back as 1 July 1992, and up until the quarter starting on 1 January 2018 (inclusive). It does not apply to SG shortfalls for quarters starting from 1 April 2018.
An employer will lose all benefits from the amnesty if they fail to pay, or enter into and comply with arrangements to pay, any SG charge imposed on the disclosed shortfall for the quarter. If the ATO identifies that an employer has an SG shortfall after the amnesty concludes, the ATO will take into account the employer’s ability to access the amnesty when determining any remission of the Part 7 penalty. While the ATO will consider the circumstances of each case, a minimum penalty of 50% will generally be applied to employers who could have come forward during the amnesty but did not do so.
Disclosure to ATO
To qualify for the amnesty, a disclosure about historical underpayments of superannuation by an employer must be made to the ATO in the approved form (and must not have been previously disclosed).
An employer that has come forward before the start of the amnesty on 24 May 2018 will not benefit from the amnesty by disclosing an amount of SG shortfall that has previously been disclosed to the Commissioner (ie an amount already included in an existing SG charge assessment). However, an employer may still qualify for beneficial treatment under the amnesty if the employer has previously made disclosures about a SG shortfall for a quarter but comes forward with information about additional amounts of SG shortfall for the quarter. This could be the case where an employer has previously lodged a SG statement for the quarter which understated the amount of SG shortfall.
Reduced penalties
An employer that qualifies for the amnesty in relation to their SG shortfall for a quarter:
- will not have to pay the administrative component in respect of employees for whom the employer has an individual SG shortfall identified because of a disclosure under the amnesty;
- will not be liable for the additional Part 7 penalty (up to 200%) for failing to provide an SG statement by the time they were required to do so; and
- can deduct payments made in relation to SG charge imposed on the SG shortfall, or contributions that are offset against the SG charge, that are made during the amnesty period.
Deduction for SG charge payments
As noted above, the Bill will amend ss 26-95 and 290-95 of the ITAA 1997 so that employers can claim a deduction for SG charge payments (and offsetting contributions) made during the amnesty period. Employers that already had an outstanding SG charge debt prior to making a disclosure under the amnesty will also be able to claim deductions for payments they make even though the ATO will first apply their payments to clear their existing debt.
Paying SG charge amount
To qualify for the amnesty, employers must pay an employee’s full SG entitlement, including the employee’s individual SG shortfall amount, nominal interest and any GIC. Where an employer has the capacity to pay on the day they make the disclosure and does not have an existing SG charge assessment for the quarter, the employer may choose to make contributions (of the employee’s individual shortfall and nominal interest) directly into an employee’s superannuation account and elect to offset these amounts against their liability for SG charge in accordance with s 23A of the SGAA.
Employers who have an existing SG charge assessment for the quarter, or are otherwise unable to contribute directly into their employee’s superannuation accounts, will need to pay the SG charge (or amounts equal to the SG charge) to the ATO. Employers must pay the components of the SG charge imposed on the disclosed amount that reflect their employees’ SG entitlements (individual SG shortfall for relevant employees and nominal interest), as well as any GIC. Employers that have difficulty paying SG charge by the due date can negotiate a payment plan with the ATO.
Date of effect
The amendments to the SGAA and ITAA 1997 will apply from 24 May 2018 – the start date for the amnesty which will run until 24 May 2019.
Previous announcement
The amnesty was not previously announced.