Superannuation guarantee scheme: Penalties

Whether penalties imposed on the taxpayer are in accordance with Part 7 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) and with Superannuation Guarantee Ruling SGR 94/3.

The penalties imposed on the taxpayer were in accordance with Part 7 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) and with Superannuation Guarantee Ruling SGR 94/3.

Following failure to respond to several notices an audit was conducted which resulted in the identification of the taxpayer, a professional in the tax area, having an outstanding liability for employee superannuation contributions under the SGAA for several financial years.

The taxpayer paid the shortfall and included an apology and explanation for the delay. The explanation made reference to the taxpayer having suffered illness.

Part 7 penalties were imposed on the taxpayer for all years under section 59(1) of the SGAA (allowing for remissions of penalty under subsection 62(3) (SGAA) and Superannuation Guarantee Ruling SGR 94/3). Included in the penalty were components for culpability (25%), hindrance (20%), a recurring offence (5% for the second year increasing by 5% for each subsequent year) and a non-lodger component (10%).

The taxpayer objected against the penalties on the grounds they had supplied relevant information to the ATO and they had received advice from the ATO which led them to believe they were correctly complying with the superannuation guarantee legislation. The taxpayer's superannuation fund had accepted the late contributions, further contributing to the misunderstanding.

Under Part 7 of the SGAA, a penalty is payable by the employer for failing to provide, as required, information relevant to assessing the employer's liability to pay superannuation guarantee surcharge. The penalty for failing to provide statements or information is 200% of the amount of SG payable by the employer in the year.

Under subsection 62(1) of the SGAA, the Commissioner must make an assessment of the penalty payable under Part 7. Subsection 62(3) gives the Commissioner the power to remit all or part of the penalty payable. SGR94/3 provides guidelines to officers to assist them in exercising their discretion to remit the additional charge. The Ruling proposes that officers work out the appropriate level of penalty, and then remit the difference between that level and the level imposed in the legislation.

On the basis of the explanations provided by the taxpayer that illness, misunderstanding and poor communication all played a significant part in the failure of the taxpayer to provide the required documents promptly, the 20% hindrance component was remitted to NIL for each SG Statement year under subsection 62(3) (SGAA).

Remitting other penalties imposed was not appropriate in the circumstances. Given that the taxpayer is a professional in the tax area, it was considered that a failure to meet the taxpayer's own superannuation guarantee obligations was not a matter to be treated leniently.