Come October 9, many SME directors will get a nasty surprise in the mail.
That’s the day the Australian Tax Office has said it’ll begin to send out the first notices about unpaid superannuation obligations, which from July 2012 have made company directors personally liable for any unpaid superannuation owed to their current or former employees.
The notices, which are similar to those currently sent out for outstanding Pay As You Go tax, are the first time the ATO will begin enforcing the new laws. For much of the past year, the ATO’s approach has been to educate rather than enforce, Ashley King, Deloitte’s tax controversy lead partner tells SmartCompany.
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He sits on a quarterly forum with the ATO that meets to discuss the roll-out and administration of the new regime, and says, so far, only around 50 director penalty notices have been issued for failure to pay super.
Soon, the ATO will more actively enforce the new regime.
King says he’s not sure how many notices will be sent out. “It could be hundreds or thousands,” he says.
“They’ve certainly been getting ready for this letter campaign for the past few months.”
SME directors are far more likely to be targeted than their counterparts at larger companies.
“SMEs have peaks and troughs with cashflow,” King says. “That means this is more of an issue for smaller businesses.
“The only way a large business would get into trouble with this is if they’re really up against the wall.”
If you or your directors receive a letter, King says the first step is to figure out exactly how much super is owed to your employees.
“The ATO will have an amount in the letter. The first thing you should do is determine whether that amount is correct.
“You particularly want to check whether it’s understated. And then, you can work out whether you can repay quickly or not.”
If a director cannot quickly repay the amount of super owed, they should talk to the ATO or a tax adviser. In most cases, they would receive advice about setting up a repayment scheme.
“If you do set up one of these, it’s important it’s achievable,” King warns. “Once you commit to a payment plan, it’s very important to stick to it.”