SG penalty remissions: How not to trip up, post-amnesty

The ATO has published draft law administration practice statement PSLA 2020/D1 – remission of additional superannuation guarantee charge.

With the SG amnesty now expired, so too has the ability of the ATO to remit part 7 penalties in full (which can otherwise amount to 200% of the SG charge). To provide guidance to its staff around the remission of Part 7 penalties post-amnesty, the ATO has released this practice statement.

The starting point is that, following the amnesty, the ATO is not permitted by law to reduce the Part 7 penalties below 100% of the SG charge except where:

– the employer voluntarily came forward to lodge an SG statement prior to being notified of any ATO SG compliance action, or

– exceptional circumstances (see later) prevented the employer from lodging the SG statement either:

– during the amnesty period (24 March 2018 to 7 September 2020), or

– before the employer was notified of any ATO SG compliance/audit action.

ATO officers will need to follow a four-step penalty remission process when deciding whether it is appropriate to remit the Part 7 penalty down from 200%:

  1. Set a base penalty level based on an employer’s ability to comply with its SGC obligations

These base penalties are set out in a table contained in the practice statement. The base penalties range from 200% if a default assessment is made by the ATO, and the employer has demonstrated complete disengagement or engaged in a ‘phoenix’ arrangement, down to 0% of the SG charge where an employer has lodged an SG charge statement before the lodgement date.

Having determined the base penalty, this should then be adjusted up or down in accordance with the following three steps.

  1. Consider the employer’s compliance history in the three years leading up to the disclosure or the ATO compliance action
  2. Identify other mitigating facts or circumstances

These may include but are not limited to:

– the malfunction or outage of a key ATO system which the employer can demonstrate caused them to narrowly miss the lodgement due date.

– ill-health of the employer or a key employee of the employer

– the employer has made an unprompted voluntary disclosure of their SGC liability for a quarter and the facts indicate the shortfall arose due to an error or honest mistake

– the employer made all required contributions, but was late in paying by a small amount of time

  1. Identify any exceptional circumstances that prevented lodgement of an SG statement prior to notice of ATO compliance action

These may include but are not limited to:

– an employer has been impacted by a natural disaster which directly impacted its ability to lodge

– an employer’s ability to lodge has been directly impacted by the COVID-19 pandemic

– an employer relied on ATO guidance that advised that they did not have an SG shortfall

– an employer was suffering from severe illness or other affliction that rendered them incapable of lodging an SG statement

The practice statement applies from 8 September (the day after the end of the amnesty). Although the amnesty concessions are no longer available, the practice statement provides guidance around the factors to put forward to the ATO when seeking to reduce part 7 penalties, post-amnesty.

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