Simplifying and reducing the harshness of the superannuation guarantee charge

More details from the treasury website: On 20 January 2015, the Minister for Small Business, the Hon Bruce Billson MP, announced changes to simplify and reduce the harshness of the superannuation guarantee (SG) charge. These changes will apply from 1 July 2016.

A full media release related to the announced changes is available from the treasury website

Under the Superannuation Guarantee (Administration) Act 1992 (SGAA), employers must make quarterly SG contributions for their eligible employees to avoid having to pay the SG charge to the Australian Taxation Office. The SG charge regime imposes punitive costs to deter employers from paying their SG contributions late or in part. This can have a significant impact on small businesses.

As a part of announced changes, the SG charge will be simplified by aligning the earnings base for calculating the SG charge (currently total salary and wages) with the earnings base for calculating SG contributions (ordinary time earnings).

The changes will also reduce the harshness of the SG charge by aligning the interest component on any SG shortfall with the period contributions are outstanding. These changes will also remove the additional penalties under the SGAA and align them with the administrative penalties under the Tax Administration Act 1953.

Treasury is now seeking comments from interested parties on the proposed legislation and the accompanying explanatory memorandum to implement this announcement.

These changes complement two other measures to reduce small business superannuation compliance costs; expansion of the small business superannuation clearing house and simplifying when a standard choice form must be provided by an employer. Both of these changes have applied since 1 July 2015.

The submissions for this consultation are now closed: The submissions were closed on Friday 18 September 2015.

Further details can be obtained from the Tax Institute.

The Tax Institute welcomes the opportunity to make a submission to Treasury in relation to the Superannuation Guarantee Legislation Amendment (Simplification) Bill 2015 exposure draft legislation (Exposure Draft).

The Tax Institute

The Tax Institute is Australia’s leading professional association and educator in tax, with offices in most major cities. Focusing solely on tax, the Institute provides the best resources, education and networks. Our mission is to equip tax professionals with everything they need to demonstrate the highest level of expertise and increase the advancement of public knowledge and understanding. We are also committed to propelling members into the future and onto the global stage with the introduction of the Chartered Tax Adviser designation.

More details on the exposure draft release by the Treasury Department

Treasury has released an exposure draft, together with explanatory material of new law aimed at simplifying and reducing the harshness of the superannuation guarantee charge. The changes are to apply from 1 July 2016.

Currently, harsh penalties are imposed on employers who pay their SG contributions late or in part, as follows:

the late payment gives rise to a non-deductible SG shortfall on which SGC is imposed. The SG shortfall comprises of the employer’s individual SG shortfalls for each employee, nominal interest and an administration charge for the quarter. SG and SGC are calculated on different bases, which increases complexity. if an employer pays SG contributions late, but does not lodge a SG shortfall statement, nominal interest accrues indefinitely until an assessment is made. if the employer fails to lodge an SG statement, they are liable to pay an additional SGC penalty up to 200% of the SGC payable by the employer. The exposure draft contains the following proposals:

amend the SGAA to provide that an employer’s individual SG shortfall for an employee is worked out using ordinary time earnings. amend the SGAA to align the period over which the nominal interest accrues with the period that the SG contributions are actually outstanding for. amend the SGAA and the TAA 53 to remove the additional SGC penalty and replace it instead with the general tax penalty provisions in the TAA 53.


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