If you’re reading this post you’ve probably noticed that penalties for paying superannuation late have become extremely harsh. The law itself hasn’t changed – what has changed is the ATO has changed its practice on how it works out the amount of the penalty.
We won’t go into a lot of detail here because you are probably reading this post to work out what to do – and we can share some tips on that – but just quickly, and so you know, the way the penalty works is you get charged 200% of the late super (even if you paid it) and then the ATO decides how much of this penalty to “forgive” (the technical term is “remission”).
This is a summary of how it is supposed to work:
- you have an employee or employees and you need to pay their super at the end of each quarter by the due date
- for some reason you don’t pay, then you need to lodge what is called an SGC statement within about a month or so.
- if you don’t lodge the SGC statement, you will be hit with a penalty automatically.
- the ATO will send out a letter saying you are behind on your super. If you reply immediately, you will have the highest remission rate.
- if you don’t reply, the ATO will appoint an auditor. Depending on how this goes, the penalty will be very harsh.
The ATO officers use either PS LA 2019/1 (withdrawn with effect 8 September 2020) or PS LA 2020/4. If your officer is using PS LA 2019/1 you are in luck because they can take into account the late payments and reduce your penalty. Also, the rates of remission are much higher.
If your officer is using PS LA 2020/4 then you are in for a bit of a challenge and will need to do some quick thinking. It is very important to understand that the ATO officer is bound by this practice statement. Even if they want to, they can’t deviate from it. The best thing you can do is help them apply the practice statement in a way that gets the best result. Ask them to help you do this and make some helpful suggestions if you can.
The remission is now very much unique to your personal circumstances. Factors such as how fast you reply, why you didn’t reply on time, your general compliance history, other mitigating factors are very important. If you are in discussions with the ATO on how to fill in a SGC statement then that helps too.
Ultimately, the law (and penalty remission) is designed to reward pro-active people, so as a rule of thumb the more proactive you are the better off you will be.
The practice statement is long and boring but it is worth reading it.
If you have gone through the template and done everything you can but the penalty is still really harsh, then the best option is to object and ultimately perhaps take it to the AAT.
Once the dispute is taken outside the ATO (e.g. the AAT), the practice statement does not necessarily apply and so you can potentially receive a decision more favourable outcome than the practice statement.
If you do find yourself in a difficult spot, we do have a template to use if you have received a penalty and want to challenge (object) to it. This superannuation objection template can also be helpful to give you some ideas on what to say/do or if you need to object against the penalty.
It comes with free 15 minutes support on how to fill it in, and we can brainstorm some ideas together.