SPR 2021/D2


Superannuation Industry (Supervision) Act 1993

I, Louise Clarke, Deputy Commissioner of Taxation, make this determination under subsection 21(1) of the Superannuation Guarantee (Administration) Act 1992.

Draft Legislative Instrument

1. Name of instrument

(1) This determination is the Superannuation Guarantee (Administration) - stapled fund - guidelines for the reduction of an employer's individual superannuation guarantee shortfall for late contributions due to non-acceptance by notified stapled fund determination 2021.

2. Commencement

(1) This instrument commences on 1 November 2021.

3. Application

(1) This instrument applies to decisions by the Commissioner of Taxation (Commissioner) about whether or not to reduce an employer's individual superannuation guarantee shortfall (shortfall) for an employee for a quarter for the purposes of subsection 19(2F) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) where the conditions in subsection 19(2G) of the SGAA apply.

(2) This instrument does not apply to:

(a)
the part of an employer's shortfall where the superannuation guarantee contributions made by an employer to a fund for an employee for a quarter do not otherwise reduce the employer's charge percentage to nil under sections 22 or 23 of the SGAA, or
(b)
an increase to an employer's shortfall imposed by subsections 19(2A) and (2B) of the SGAA because the employer did not make the superannuation guarantee contributions to a fund that complies with the choice of fund requirements.

4. Determination

(1) In order to avoid a superannuation guarantee charge liability, employers need to provide a minimum level of superannuation support for their eligible employees by making contributions (superannuation guarantee contributions) to a complying superannuation fund or scheme or a retirement savings account within 28 days after the end of each quarter (the quarterly due date) under Part 3 of the SGAA.

(2) If the actual level of superannuation support made for an employee by the quarterly due date is less than the level of superannuation support prescribed in the legislation, the employer will have a shortfall under section 19 of the SGAA because the level of contributions made will not reduce the employer's shortfall to nil under sections 22 or 23 of the SGAA.

(3) With effect from 1 November 2021, the Commissioner may reduce (including to nil) the amount of an employer's shortfall for an employee for the quarter in accordance with subsection 19(2F) of the SGAA where:

(a)
the employer, or their agent, was most recently notified by the Commissioner that a fund was a stapled fund for an employee following the employer (or their agent) making a request in accordance with section 32R of the SGAA
(b)
the employer attempted to make superannuation guarantee contributions to the most recently notified stapled fund for the employee
(c)
the fund did not accept contributions from the employer for the employee
(d)
the employee did not have a chosen fund at the time the employer attempted to make the superannuation guarantee contribution, and
(e)
the employer subsequently made a superannuation guarantee contribution to a fund on behalf of the employee after the quarterly due date.

(4) The Commissioner, in making a decision on whether or not to reduce the employer's shortfall, is required by subsection 21(2) of the SGAA to have regard to particular guidelines. This instrument sets out those guidelines.

(5) The Commissioner will have regard to all the relevant facts and circumstances of each individual case in making a decision whether or not to reduce an employer's shortfall for an employee.

(6) The Commissioner may apply the same level of reduction to the employer's shortfall for each employee in the group in a quarter where it is evident that the circumstances are similar for a group of employees.

Introductory period

(7) The Commissioner will apply a transitional approach to the making of decisions on whether to reduce the employer's shortfall for a quarter within an introductory period of 12 months from the date of commencement of the single default account (stapled fund) amendments, being 1 November 2021 to 31 October 2022, to the choice of fund rules in Part 3A of the SGAA.

(8) During this introductory period, the Commissioner will reduce an employer's shortfall for one or more employees to nil where the circumstances set out in section 4(3)(a) to (e) have been met and the employer has made reasonable attempts to comply with the choice of fund rules when making the late superannuation guarantee contributions.

(9) If an employer has not made reasonable attempts to comply with the choice of fund rules during the introductory period, the Commissioner will determine whether or not to reduce the employer's shortfall in accordance with the general Reduction guidelines outlined below.

Reduction guidelines

(10) The Commissioner may reduce the amount of the employer's shortfall in whole or in part where all of the circumstances set out in section 4(3)(a) to (e) have been met unless the employer has a superannuation guarantee charge (SGC) assessment for the quarter and chosen to offset the late contributions against the SGC or to carry forward the late contribution and apply it as a pre-payment of a future contribution for the same employee.

(11) In determining the level of reduction to the amount of the employer's shortfall, the Commissioner will have regard to:

(a)
whether an employer made the late superannuation guarantee contribution to a fund for the employee that complied with the choice of fund rules when the most recently notified stapled fund did not accept the contributions, and
(b)
other mitigating factors or exceptional circumstances that affected the employer in making the superannuation guarantee contributions or their compliance with the choice of fund rules.

(12) The Commissioner will also have regard to whether there are circumstances to support an increase to the employer's shortfall.

Late superannuation guarantee contributions to a fund that complies with the choice of fund rules

(13) In making a decision on the level of the reduction to the amount of the employer's shortfall, the Commissioner will have regard to whether an employer made the late superannuation guarantee contributions to a fund for the employee that complies with the choice of fund rules when the most recently notified stapled fund did not accept the contributions.

(14) It would be appropriate for the Commissioner to provide a greater level of reduction (including to nil) where an employer has made the late superannuation guarantee contributions within a reasonable time to a fund that meets the choice of fund rules. For example, contributions made to a fund the employee has subsequently chosen, a successor fund of the most recently notified stapled fund, another stapled fund notified by the Commissioner, the employer's default fund or fund specified under a workplace determination or enterprise agreement made before 1 January 2021 if notified the employee did not have another stapled fund.

(15) The Commissioner may provide a lesser level of reduction where an employer did not make the late superannuation guarantee contributions within a reasonable time or made them to their default fund without regard to whether there was another fund for the employee that met the choice of fund rules.

(16) It would not be appropriate for the Commissioner to reduce the employer's shortfall where the employer made the late superannuation guarantee contributions to a fund:

(a)
that did not meet the choice of fund rules where the employer was aware that the employee had

(i)
made a choice of fund, or
(ii)
a stapled fund account, or

(b)
after the notification of an estimate of SGC or the issue of an SGC default assessment,

unless there were other mitigating facts and circumstances or exceptional circumstances.

(17) Before making a decision on the level of reduction, the Commissioner will have regard to other factors to determine if the level of reduction should be increased or further decreased. These factors include:

(a)
other mitigating facts or circumstances
(b)
any exceptional circumstances
(c)
any actions taken by the employer to prevent or obstruct the Commissioner, or
(d)
shortfalls of the same type in previous quarters.

Other mitigating facts and circumstances or exceptional circumstances

(18) The Commissioner will have regard to other mitigating facts and circumstances or exceptional circumstances that may have affected an employer's ability to meet the choice of fund rules, or impacted the making of superannuation guarantee contributions, that would provide grounds to further reduce the level of the employer's shortfall.

(19) These facts or circumstances include but are not limited to:

(a)
the date of commencement of employment of the employee in comparison to the end of the quarter
(b)
delays in the notification that the most recently notified stapled fund could not accept the contributions
(c)
a subsequent notified stapled fund did not accept the contributions from the employer
(d)
circumstances outside the control of the employer such as:

(i)
the malfunction or outage of key systems
(ii)
ill health or affliction of the employer or a key employee of the employer
(iii)
natural disasters (for example, fires and floods) or other events where the effects are more than the resultant financial hardship or business downturn, or

(e)
the level of co-operation by the employer with the Commissioner.

(20) The Commissioner will not have regard to the above circumstances where the employer could reasonably be expected to have understood and complied with the choice of fund rules and their superannuation guarantee obligations. That is, it would generally not be appropriate for the Commissioner to further increase the level of reduction where, for example, an employer has been previously subject to choice of fund rules compliance action, received guidance from the Commissioner in administratively binding advice or previous compliance activity, or have repeatedly made contributions to a fund that does not meet the choice of fund rules.

(21) It would also not be appropriate for the Commissioner to further reduce the employer's shortfall simply because the amount of the shortfall may be relatively small.

Circumstances that may increase the employer's shortfall

(22) The Commissioner will have regard to whether there are circumstances which would support an increase in the amount of the employer's shortfall.

(23) It may be appropriate for the Commissioner to uplift the amount of the employer's shortfall by up to 20% where:

(a)
the employer engaged in action to prevent or obstruct the Commissioner from determining the individual superannuation guarantee shortfall and / or the level of reduction, or
(b)
an employer had a shortfall in the previous quarter because the late superannuation guarantee contributions they made after the most recently notified stapled fund did not accept the contributions were to a fund that did not comply with the choice of fund rules.

(24) The Commissioner cannot apply an uplift that results in the employer's shortfall exceeding the original amount of the shortfall.

Notification of decision

(25) The Commissioner must notify the employer in writing of the decision made under subsection 19(2F) of the SGAA. This written notice will contain the reasons why the particular decision was made irrespective of the level of reduction.

5. Definitions

(1) A number of expressions used in this instrument are defined in Superannuation Guarantee (Administration) Act 1992, including the following:

(a)
charge percentage, has the meaning given by subsection 19(1)
(b)
chosen fund, has the meaning given by section 32F
(c)
complying superannuation fund or scheme, has the meaning given by section 7
(d)
individual superannuation guarantee shortfall, has the meaning given by subsection 19(1)
(e)
RSA (or retirement savings account), has the meaning given by section 6 with reference to the Retirement Savings Accounts Act 1997
(f)
stapled fund, has the meaning given by section 32Q
(g)
superannuation guarantee charge, has the meaning given by section 6.

Consultation

Subsection 17(1) of the Legislation Act 2003 (LA) requires, before the making of a determination, that the Commissioner is satisfied that appropriate and reasonably practicable consultation has been undertaken.

As part of the consultation process, you are invited to comment on the draft determination and its accompanying draft explanatory statement.

Please forward your comments to the contact officer by the due date.

Due date: 16 August 2021
Contact officer: Shaun Milner
Email: shaun.milner@ato.gov.au
Phone: (03) 9215 3526



Louise Clarke
Deputy Commissioner of Taxation
Policy, Analysis and Legislation
Law Design and Practice


Related Explanatory Statements:

SPR 2021/D2 - Explanatory statement