ATO targets small business over superannuation payments
Heads up small business owners: the ATO has begun sending ‘nudges and warnings’ in relation to Superannuation Guarantee obligations. What exactly does this mean for you?
By Michael Mekhitarian
No more excuses
Essentially it means that you really need to get your cash flow organised because there are no longer any excuses for not meeting super entitlements for employees.
The ATO has made significant changes over the past 12-24 months, most notably introducing Single Touch Payroll reporting (STP) for all businesses, large and small, right across the country.
And, now that STP is in play, the ATO is able to data-match your Single Touch Payroll information to superannuation fund information. If there’s a discrepancy between what you’ve reported as a payment, and what the superfund has received, then there are fines and other repercussions.
This initiative is as much about making a big effort to catch the cheats, as it is about cleaning up the entire tax and superannuation system, to make it more streamlined and transparent.
Super Guarantee Amnesty
Let’s go back a step.
Having discovered that many small businesses were behind or not paying the correct SG amount to their workers, the ATO initiated a 12-month amnesty period to allow small businesses to catch up without incurring a penalty. The amnesty ended in May this year. Over this period, it’s estimated that the ATO recovered more than $800 million in unpaid super.
The idea behind the amnesty was that by the time Single Touch Payroll (STP) was implemented (every business across Australia was supposed to be on board by July 1 2019), we could all start the new financial year with everything up to date, because under STP, employee super payments need to be made and accounted for every single pay cycle.
But the grace period is now over. The ATO has recently scrutinised 75 million transactions for 400,000 businesses using its new abilities to cross-match data and it is intent on conducting more checks.
Cross-matching data
ATO deputy commissioner James O’Halloran has said on many occasions that his tax team now has an unprecedented level of visibility around super information at both the account balance, and the transaction level, not just through STP reporting but also through reporting by super funds regulated by the Australian Prudential Regulation Authority (APRA).
The tax office used to receive annual reports from APRA-regulated super funds, but now it receives this information each quarter. These reports, combined with STP reporting information, will enable the ATO to track super more closely.
This ‘proactive approach’ signals a new era, one which we have been drifting towards for some time. The ATO has expanded powers and resources to tackle all aspects of super and tax evasion, and furthermore, it will use them.
The benefit for business is that it levels out the playing field and makes it fair across the board, which is excellent news for the large percentage of small businesses doing the right thing. And what’s more, it will mean any errors or unintended discrepancies can be picked up quickly, then reviewed and resolved in a much more timely way – before the outstanding amount becomes unmanageable.
Are you getting the right help?
That said, it also highlights the need for small business to be on the front foot and to ensure that they’re getting the right professional advice around these financial obligations. For small businesses, taxation, wages and the 9.5 % super guarantee are often the biggest regular outgoings affecting cash flow.
And these are not always predictable – they can be affected by business growth, or ‘busy’ and ‘slow’ seasons, or a serious bout of the ‘flu striking the office, resulting in the need to employ a temp workforce to cover sick leave for a few weeks.
If you think you might be affected, then you need to contact the ATO – contacting the tax office rather than having them chase you will afford you some leniency, but you may still face a fine.
Conversely, if the ATO contacts you, take the chance to get it right with them. Be co-operative. If it looks like you have a lump sum to pay, consider ways to finance this that won’t adversely affect you over the coming months.
As far as STP reporting goes, the ATO recently extended the deadline for businesses to come on board, after realising that many small businesses had failed to make the switch by July 31. Many of these are rural businesses and micro businesses, and if this means you, then you’ll be pleased to know that the ATO has announced no penalties for STP non-compliance in the first 12 months, so there is still time to adopt, although it does mean moving over the cloud-based accounting software.
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