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Why you should undertake a Superannuation Guarantee audit

Retirement
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By David McNeice | July 13, 2020

With the end to an amnesty for non-compliant employers looming on 7 September 2020, now is a very good time to conduct an audit of your Superannuation Guarantee (SG) compliance.

The SG system is complex. Despite being in effect for 28 years, some of the rules still represent a trap for the unwary into non-compliance. These breaches are overwhelmingly unintended, and frequently involve small monetary differences between what has been contributed to superannuation and what should have been. Yet, if left uncorrected over time, small errors compound.

Currently, the mandatory SG rate is 9.5% of ordinary time earnings, which increases to 10% on 1 July 2021. Employers need to prepare for this increase during the next six to nine months, to determine what flow on effects there will be to total remuneration, to communicate the changes to employees and finally, prepare payroll systems well in advance of the effective date.

A natural part of the preparation is checking that the earnings components counted in ordinary time earnings (including, from 1 January this year, employee salary sacrifice contributions) have been correctly brought into the calculation. This aspect of the earnings base brings in much of the complication and can confound many employers – establishing which earnings, allowances, bonuses and so forth must be included is a significant exercise.

What does the amnesty allow?

In short, any employer that discloses to the government (via the Australian Tax Office, the responsible agency) that it has under-contributed SG contributions (over any period before 31 March 2018, back to July 1992), can make good that shortfall before 7 September 2020 without two of the normal penalty imposts that would apply. The penalties employers would ordinarily face are non-deductibility for tax of the contribution and an administration fee per employee.

This is a powerful reason to check SG compliance now. If there is a problem, it will almost certainly come to light when preparing for 1 July 2021. Discovering and fixing that problem before the amnesty ends will be potentially much less costly than if it is discovered afterwards.

Willis Towers Watson can help employers ensure SG compliance and that they are positioned as strongly as possible for upcoming changes.

Author

Senior Director, Retirement

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