Remediating non-compliance
Under the current SG regime, in the event of a shortfall, an applicable SG Charge is made up of three components:
- The SG shortfall calculated on applicable employees’ Salary or Wages (not just OTE)
- Nominal interest of 10% per annum (accruing from the start of the relevant quarter)
- Administration fee of $20 per employee, per quarter.
The fact sheet proposes an ‘updated’ SG charge, with the three components being:
- The SG shortfall calculated on OTE (rather than the current Salary or Wages)
- Notional Earnings comprising a compounding daily interest calculated at the general interest charge (GIC) (accruing from the day after the ‘due date’)
- Administration uplift, calculated as an uplift of the SG shortfall component of up to 60%
In addition, where an SG charge is assessed but remains unpaid, GIC will accrue on all three components on a daily compounding basis. Further, if the SG charge is not paid in full within 28 days, an SG charge payment penalty of up to 50% will apply.
Also, the fact sheet proposes that the SG charge (which is currently non-deductible) will become deductible, although additional penalties and interest will remain non-deductible.
Whilst the proposed ‘updated’ SG charge framework simplifies the SG shortfall component and makes the SG charge deductible, there are several deterrence components in-built. For example, the notional earnings’ daily compounding interest rate (at the GIC, which is currently 11.36%) and the potential 60% administration uplift.
For the latter, in particular, the fact sheet notes that this ‘will be reduced when employers voluntarily disclose’, which suggests that this will be a discretionary component that will be able to be toggled by the ATO based on factors such as compliance history, nature of assessment (voluntary or otherwise), etc.