What are the differences in how the ATO will seek to remit Part 7 penalties versus previous iterations? - 18 August 2021
On 29 July 2021, PS LA 2021/D1, the ATO’s draft administration practice statement on the remission of additional Superannuation Guarantee (SG) Charge (i.e. the 200% Part 7 “penalty”), was released. This is the third PS LA on the Part 7 penalty in as many years.
Importantly, there are some differences in how the ATO will seek to remit Part 7 penalties from previous iterations. Some of the key differences include:
- A greater emphasis and level of remission provided to employers who attempt to comply with their superannuation obligations via late payments (which are then claimed as Late Payment Offsets against an SGC);
- Confirmation that amended SG Charge statements relating to those lodged during the SG Amnesty will not qualify for the same relief. That is, if an employer had an SGC assessment that was covered by the SG Amnesty, and they disclose new information after the end of the SG Amnesty period that increases their SGC for the quarter, the new amounts will not receive the benefits of the SG Amnesty;
- A stronger weighting on employers who have previously lodged SG Charge statements as having a “poor compliance history”, and thus being enforced with a negative 15% remission penalty; and
- Illustrative examples of what constitutes mitigating facts and circumstances for potential further remission, including distinction between errors for employees and errors for “contractors” (whether misclassified as such, or where superannuation obligations were not considered under the extended definition rules).
In relation to the firmer approach to “poor compliance history”, the new PS LA 2021/D1 provides an example of an employer who has lodged SG Charge statements three times in two years, and as a result was given a poor compliance rating. The outcome was an overall 50% penalty applied to the SGC amount.
Overall, the new PS LA 2021/1 demonstrates an ATO expectation of proactive compliance, including addressing process/control/governance gaps once identified, so as not to repeat errors. The example noted highlights that the ATO will now more mechanically reference historical compliance, through the penalty regime, creating a clear incentive for employers to fix gaps once and for all. No longer is there an ability for employers to rely on the safety net of penalty remission when voluntarily coming forward and disclosing mistakes, if that constitutes repeat behaviour.
The focus on proactive compliance monitoring is further sharpened with STP Phase 2 reporting on the horizon (a start date of 1 January 2022), which will include granular reporting of “gross” pay across constituents such as paid leave, allowances, overtime, bonuses and commissions, etc. giving the ATO further data insights to better review and target SG non-compliance going forward.
As such, based on the evolving SG environment, we recommend that employers consider the mechanisms that can be implemented to monitor and assess quarterly SG obligations (for example, quarterly exception-testing tools), with any inadvertent shortfalls addressed prior to 28 days after the end of the relevant quarter.
