Superannuation is a highly regulated area. If an employer doesn’t meet their superannuation obligations on time, they need to lodge a Superannuation Guarantee Charge (SGC) statement which attracts significant penalties.
As all accountants and employers know when dealing with these matters, there is no ability to have these penalties remitted. It doesn’t matter if you’ve paid super late 100 times or if this is your first time paying late in 20 years, the penalties imposed will be the same for both employers.
The reason that this is the case is because the current interpretation of the legislation doesn’t provide for any ability to revise or remit the penalties. Even if there is a valid reason for late payment and the ATO sympathises with your situation, they don’t have the power to change the penalties.
In welcome news for employers, draft legislation has been introduced that addresses how ATO officers may exercise their discretion to remit SGC penalties. The legislation that has been introduced is PS LA 2021/D1 and this will replace the existing PS LA 2020/4 when it is finalised. A “PS LA” is a practice statement which is an internal ATO document that provides instruction to ATO staff.
The key components of PS LA 2021/D1 are:
An employer should only be considered for a penalty relief arrangement 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.
If an employer meets the requirements to be eligible for penalty relief under section 7, the ATO Officer must then follow the guidelines provided in Appendix 1 in relation to the four-step penalty remission process. The four-step penalty remission process is:
Step 1: Consider remission based on the employer’s attempt to comply with their obligations through late payment.
Step 2: Consider remission based on the employer’s attempt to comply with their obligations by lodging an SG statement.
Step 3: Consider any increase or reduction in penalty based on the employer’s compliance history.
Step 4: Consider any other mitigating facts or circumstances that warrant further remission.
PS LA 2021/D1 is a positive step forward by the ATO in their approach to administering penalties for SGC payments as it will reward those employers that have been proactive in their attempt to meet their superannuation obligations and also those that have a good compliance history.
If you would like to discuss your superannuation obligations, please do not hesitate to contact your Hall Chadwick QLD representative.