Legal news
Under the super guarantee system, super contributions are made on behalf of “employees”.
Section 12(1) of the Superannuation Guarantee (Administration) Act 1992 (SG Act) provides that “employees” for the purposes of the SG Act are defined under their ordinary meaning. That is, the meaning of that term at common law.
In the recent decision of Signium Pty Limited and FCT [2022] AATA 2824, the Administrative Appeals Tribunal (Tribunal) upheld super guarantee (SG) assessments issued by the Commissioner of Taxation (Commissioner) and refused to remit Part 7 penalties further.
The taxpayer operates a small pig farming business. The business is run by a general manager, and at relevant times it employed two or three people.
The ATO conducted an audit of the taxpayer’s SG obligations and issued 16 SG charge assessments for quarters ending 30 September 2013 to 31 March 2017. The Commissioner also issued a Part 7 penalty assessment of 200% of the SG charge (Part 7 penalties are automatically incurred under Part 7 of the Superannuation Guarantee (Administration) Act 1992 (SG Act) for failure to lodge SG charge statements within the relevant timeframe).
The taxpayer disagreed with the ATO’s calculation of the shortfall amounts on the SG charge assessments. However, the Tribunal accepted the ATO’s calculations as they were more thorough than those provided by the taxpayer. The taxpayer asked the Tribunal to remit the shortfall interest component of the SG charge, but the Tribunal declined, noting that the Commissioner has no discretion under the SG Act to remit the shortfall interest component.
The Part 7 penalties were remitted to 35% during the review process, and the Commissioner agreed that a further 25% remission was appropriate. The taxpayer argued that the penalties should be reduced further due to various factors including the general manager’s age, his health conditions, the impact of COVID-19, drought in 2018-2019, bushfires in 2019 and flood in 2021, all of which put the business under considerable pressure. However these factors all arose after the relevant quarters which were the subject of the audit, and therefore did not impact on the taxpayer’s ability to comply with its SG obligations at the relevant time. Accordingly, the Tribunal was not persuaded to remit the Part 7 penalties further.
Key takeaways from this decision:
While a taxpayer should confirm the accuracy of the calculations making up an SG charge assessment, and cross-reference these with their own records, a taxpayer cannot argue for remission of the shortfall interest component, as the Commissioner has no discretion in this regard;
Part 7 penalties are incurred automatically under the SG Act at 200% of the SG charge for late or non-lodgement of SG charge statements. The Commissioner has discretion to remit Part 7 penalties with regard to various mitigating factors. Where the taxpayer is arguing that these factors impacted on the taxpayer’s ability to comply with its SG obligations, it is key to show a nexus between these factors and the quarters in question.
Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au
Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au
Jan Oh
Graduate Lawyer
T +61 3 9611 0158
E joh@sladen.com.au
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