| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012767862728
Ruling
Subject: Deductibility of superannuation guarantee charge
Question
Can your client claim a deduction for a superannuation guarantee charge incurred?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on:
1 July 2008
Relevant facts and circumstances
Your client operates a business.
Your client previously employed a contractor (the Contractor).
You have stated that despite numerous attempts, your client was unable to get the Contractor to agree to being employed on an employer-employee relationship basis.
You advised that the Contractor wanted to take care of their own superannuation obligations and that as result your client paid the Contractor higher than industry average wage rates.
During the relevant income year, the Contractor's employment was terminated due to dishonest behaviour.
You have stated that the Contractor then complained to the Australian Taxation Office (ATO) citing unpaid superannuation guarantee.
The ATO's investigation of your client concluded that the superannuation guarantee obligations had not been met for the relevant quarters between the relevant income years.
As a result, your client has incurred a superannuation guarantee charge, which includes the superannuation guarantee shortfalls for each quarter, nominal interest charges at 10% and an administrative fee of $20 for each quarter.
Your client wishes to claim the superannuation guarantee charge as a deductible expense.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 26-95
Superannuation Guarantee (Administration) Act 1992 Section 16
Superannuation Guarantee (Administration) Act 1992 Section 17
Superannuation Guarantee Charge Act 1992 Section 3
Superannuation Guarantee Charge Act 1992 Section 5
Superannuation Guarantee Charge Act 1992 Section 6
Reasons for decision
Summary
A tax deduction is not available for a superannuation guarantee charge (SGC) incurred. Further, there are no provisions allowing the Commissioner to exercise discretion with regards to the deductibility of a SGC.
Detailed reasoning
Pursuant to section 3 of the Superannuation Guarantee Charge Act 1992 (SGCA 1992), the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992) is incorporated and read as one with the SGCA 1992.
Section 5 of the SGCA 1992 states that a superannuation guarantee charge (SGC) is imposed on any superannuation guarantee (SG) shortfall in a given period. Under section 6 of the SGCA 1992 the amount of the SGC is equal to the SG shortfall.
Section 17 of the SGAA 1992 defines the SG shortfall as follows:
If an employer has one or more individual superannuation guarantee shortfalls for a year, the employer has a superannuation guarantee shortfall for the year worked out by adding together:
(a) the total of the employer's individual superannuation guarantee shortfalls for the year; and
(b) the employer's nominal interest component for the year; and
(c) the employer's administration component for the year.
According to the facts, your client has incurred a SGC as a result of failing to meet their superannuation guarantee obligations for the relevant quarters between the relevant income years. Further, it is noted that your client wishes to claim a tax deduction for the SGC.
Section 26-95 of the Income Tax Assessment Act 1997 (ITAA 1997) expressly denies a deduction for a SGC imposed by the SGCA 1992.
Whilst we acknowledge your client's circumstances, there are no provisions in the ITAA 1997, SGCA 1992 or the SGAA 1992 that provide the Commissioner with the ability to exercise discretion with regards to the deductibility of a SGC.