Superannuation guarantee shortfalls: remission of additional superannuation guarantee charge

Should the Commissioner exercise the discretion under subsection 62(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) to remit, in whole or part, the additional superannuation guarantee charge imposed upon the seriously ill employer?

Yes. The Commissioner will exercise the discretion under subsection 62(3) of the SGAA to remit in part the additional superannuation guarantee charge imposed upon the seriously ill employer.

The employer was required to make superannuation contributions on behalf of their employees under the SGAA.

The employer was subject to a superannuation guarantee audit. The audit found that there were two years in which the amount of superannuation contributions made by the employer were less than the minimum contributions needed to avoid the superannuation guarantee charge. The employer has not lodged superannuation guarantee statements in respect to these shortfalls. Consequently, the auditor raised superannuation guarantee charge assessments and applied penalties by way of the additional superannuation guarantee charge.

The additional superannuation guarantee charge applied to the first year included a culpability component and a non-lodger component. The additional superannuation guarantee charge applied to the second year included a culpability component, a recurring offence component and a non-lodger component.

The employer objected to the imposition of the additional superannuation guarantee charge. The objection stated that the employer was diagnosed with a serious medical condition during the relevant period and that the illness interfered with their ability to conduct the business. The employer stated that the medical condition is currently in remission, and the employer was now in a position to resolve outstanding issues relating to the business. The employer's doctor provided evidence confirming that the employer experienced both physical and mental symptoms of the illness, which would have affected the employer's ability to conduct the business.

Under Part 7 of the SGAA, an additional superannuation guarantee charge, by way of penalty, is payable by an employer for, amongst other things, failing to lodge a superannuation guarantee statement. However, under subsection 62(3) of the SGAA, the Commissioner may exercise a discretion to remit all or part of the additional superannuation guarantee charge imposed under Part 7 of the SGAA. Superannuation Guarantee Ruling SGR 94/3 describes some of the circumstances where the Commissioner may exercise the discretion conferred by subsection 62(3) of the SGAA.

The auditor imposed the culpability component on the basis that the employer was careless in making the required superannuation contributions. However, the new information supplied in the employer's objection suggested that the employer was unable to make the correct superannuation contributions due to incapacitation caused by a serious medical condition. Consequently, the employer was no longer considered careless in making the contributions and the culpability components were reduced to nil for both years.

The recurring offence component applies in cases where the employer fails to lodge a statement for more than one year. The component applies on a cumulative basis to all consecutive late statements after the initial year in which the taxpayer is late in lodging the statement. It is considered that the employer's illness did not constitute grounds to remit the recurring component of the additional superannuation guarantee charge applied to the second year.

The non-lodger component is a flat 10% penalty, which applies where the taxpayer fails to lodge a superannuation guarantee statement, and this failure is discovered by the actions of the Australian Taxation Office. Prior to the audit, the employer made no attempt to lodge a superannuation guarantee statement voluntarily, and therefore the auditor applied the non-lodger component of the penalty. It was considered that the employer's illness did not constitute grounds to remit the non-lodger components of the additional superannuation guarantee charges.