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Superannuation guarantee amnesty: one last chance to pay compulsory superannuation for non-complying employers who employ "contractors"
Post by Damian Quail | Posted 5 years ago on Monday, November 11th, 2019
Employee versus contractor? Are you sure?
Over the past decade many Australian companies have retained the services of people who claim they are "contractors" not employees. Usually the "contractor" wants to be paid a gross fee/remuneration, stating that they will take care of income tax, superannuation and other payments.
The attraction for the employer is a lower total cost of retaining the person as compared to bringing them on as an employee, as well as perceived flexibility in options for ending the relationship as compared to traditional employment (the thinking is that no redundancy or leave entitlements need to be paid and no notice period applies).
Such practices were common in the IT, marketing, construction and other industries, particularly so called “digital industries”. The “gig economy” has seen the practice gain pace.
The legal reality is that many "contractors" are actually employees, particularly where they turn up to work at the same place each day, take their instructions from "a boss" at the company, are paid by the hour rather than for delivering an end product, and don't have to redo their work at their cost if the deliverable is not done to the required standard.
In such cases, income tax and compulsory superannuation guarantee payments must be paid by the employer for "contractors" who are, legally, employees. If the payments are not made, significant penalties accrue over time and must be paid to the Australian Tax Office (ATO).
Often this superannuation liability only hits home when the employer tries to sell their company and the buyer's due diligence experts point out the problem. Significant superannuation shortfall payments and ATO penalties loom large for the seller, as well as a reduction in the sale price, or at least a significant escrow sum demanded by the buyer.
A superannuation guarantee amnesty is potentially available.
Legislation has been reintroduced to Parliament providing an amnesty for employers who have not paid superannuation guarantee (SG) payments. The proposed amnesty will allow fines to be avoided, provided the SG payments are made.
The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 (the Bill) was re-introduced into the House of Representatives on 18 September 2019. The Bill was then referred to the Economics Legislation Committee for further inquiry. The Committee released its report recently - available here.
The Bill provides employers who have previously failed to pay SG contributions and failed to disclose the shortfall to the ATO with a “second chance” to self-correct any historical non-compliance.
This amnesty operates as a way for the ATO to encourage employers to disclose unpaid SG amounts for the period during which the amnesty applies - without fear that they will be liable for fines typically associated with non-compliance.
What are my SG obligations generally?
The Superannuation Guarantee (Administration) Act 1992 (SGAA) requires that employers pay a certain percentage of an employee’s earning into the employee’s superannuation fund. A Superannuation Guarantee Charge (SGC) is imposed on employers who fail to pay the required SG amount i.e. the SGC is the shortfall plus interest and administration costs, and this is payable by the employer to the ATO each quarter.
Employers can also be liable for penalties for failing or refusing to provide a statement or information as required under the SGAA, which can be up to 200% of the amount of the underlying SG amount (known as Part 7 Penalties).
How will the proposed amnesty work?
The first step is disclosing unpaid SG to the ATO. An employer who discloses SG non-compliance and pays an employee’s full SG entitlements plus any interest (which may incude nominal interest and a general interest charge (GIC)) will be entitled to the amnesty, and will avoid liability for penalties normally associated with late payment and non-compliance.
The employer with an outstanding SG liability can either:
- pay the unpaid SG amounts, GIC and nominal interest directly to the ATO; or
- pay the unpaid SG and the nominal interest to the employee's superannuation fund, and then elect to offset these amounts against their liability for SGC and GIC (if any).
However, if employers have an existing SGC assessment for a quarter, or are otherwise unable to contribute directly into their employee’s superannuation fund, they will be required to pay the SGC to the Commissioner directly.
If the employer makes a disclosure under the amnesty, the administration charge component of the SGC will be waived (see example 1.1 in the Explanatory Memorandum).
The amnesty is proposed to extend to all reporting quarters from the quarter commencing 1 July 1992 to the quarter commencing 1 January 2018.
The disclosure to the ATO must be made in the correct form, and the employer must pay the amount of the disclosed SG to the employee or the SGC to the ATO (see above) within the required period. Failure to pay will mean the employer will not be able to rely on the amnesty and will be subject to the normal penalties imposed.
It is expected that employers will be given from 24 May 2018 to 6 months after the date the Bill receives Royal Assent to make disclosure and pay the shortfall and interest (the Amnesty Period).
In summary, in order to benefit from the amnesty the unpaid SGC must:
- Not have been previously disclosed to the ATO;
- Have been incurred between 1 July 1992 and 31 March 2018; and
- Not be under examination by the ATO previously.
The employer must also:
- disclose the shortfall to the ATO within the Amnesty Period; and
- pay the shortfall plus interest within the Amnesty Period.
If the employer does the above things for eligible SG shortfalls, they will not be liable for Part 7 Penalties. SG amounts paid during the Amnesty Period will be tax deductable.
If the Bill is passed, employers who have failed to comply with their SG obligations in the past should take advantage of this opportunity to avoid liability for such penalties.
Employers who fail to disclose during the Amnesty Period
Employers who do not disclose and pay unpaid SG and interest within the Amnesty Period will be subject to higher penalties. Generally, the Commissioner has discretion to remit Part 7 Penalties. However, from the day after the Amnesty Period ends the Commissioner’s ability to remit Part 7 Penalties will be limited. According to the Explanatory Memorandum, the Commissioner will not be able to remit penalties below 100% of the amount of SGC owing by the employer for a quarter covered by the amnesty. The penalty will include interest and an administration fee.
What does this mean for my business?
The amnesty is a one-off second chance for employers to reduce their exposure to penalites for unpaid SG. Employers who are aware that they have failed to comply with their SGC obligations, or are unsure whether they have fully complied since 1 July 1992, should ensure that they keep informed of the progress of the Bill.
In particular, employers who have utilised the services of “contractors” who look-and-feel like employees should consider taking advice on whether the persons involved were legally employees for the purposes of tax, superannuation and other legislation.
If you would like further information regarding the new laws or any other issue please contact Damian Quail or Cassandra Bailey.
This article is general information only, at the date it is posted. It is not, and should not be relied upon as, legal advice. This article might not be updated over time and therefore may not reflect changes to the law. Please feel free to contact us for legal advice that is specific to your situation.
Disclose the full upfront price or risk breaking the law: new upfront pricing laws apply
Post by Damian Quail | Posted 5 years ago on Wednesday, October 23rd, 2019
It is not uncommon for businesses to advertise a headline price for goods and services to their customers, and to only disclose optional costs in the fine print or in a manner that is not necessarily clear to customers. This is no longer permitted. Some businessess will need to change their pricing practices, particularly businesses selling goods online.
The Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018 amends the Australian Consumer Law contained within the Competition and Consumer Act 2010, and imposes an obligation on businesses operating in Australia to ensure transparent pricing for consumers. As of 26 October 2019, businesses must display the total price for the goods and services including all pre-selected optional items. In other words, if optional components are pre-selected or automatically applied by the seller, these options must be included in the headline price. The customer then has the option to remove the pre-selected options selected in order to pay a lower price.
These new laws will especially affect businesses who sell goods and services online. The Explanatory Memorandum to the new legislation provides some helpful examples in relation to airlines. For example, if an airline fare is $500 and a website pre-selects an optional carbon offset fee of $5, then the headline price must be $505, not $500. However, if the carbon offset fee is not pre-selected or automatically applied, then the ticket can be advertised at $500.
The same approach is applicable for promotions which display only a portion of the total price. Businesses must ensure that the total price is displayed just as clearly as the fractional price. Essentially, the new laws aim to avoid the situation where headline prices are advertised initially, but once the customer clicks through the website the price is increased to include pre-selected options and charges.
Businesses should ensure that their pricing strategies conform with the new laws.
If you would like further information regarding the new laws please contact Damian Quail.
This article is general information only, at the date it is posted. It is not, and should not be relied upon as, legal advice. This article might not be updated over time and therefore may not reflect changes to the law. Please feel free to contact us for legal advice that is specific to your situation.
Amy Knight
PrincipalLLB (Dist), BCom
EXPERTISE
EXPERIENCE
Amy practices in general commercial and corporate law with a focus on property, business and share acquisitions and disposals.
Amy has a particular interest in property law and is routinely involved in all aspects of property transactions including legal due diligence, acquisitions and disposals, financing, leases, subdivisions, strata titles, transfer duty advice and conveyancing.
On the corporate side, Amy has acted on buy, sell and financier sides of company and business acquisitions and disposals.
Amy is based in our West Perth Office.
Amy’s recent experience includes:
- Due diligence, contract negotiation and settlement of the acquisition of multi-lot properties exceeding $30m;
- Acquisition and funding (via convertible notes and security trust) of farming properties exceeding $25m;
- Negotiation and settlement of the disposal of securities to a multinational group exceeding $20m;
- Subdivision and sale of semi-rural development site exceeding 100 lots;
- Acquisition and disposal of a number of vineyards in the Margaret River region.
Construction Contracts & Subcontracts
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We advise principals, developers, contractors, sub-contractors, project managers and consultants on all aspects of commercial construction contracts. We have extensive experience in preparing the full suite of documents relating to construction projects.
Our expertise includes:
- Preparation, negotiation and review of construction contracts, including:
- EPC contracts
- Building refurbishments and upgrades
- Road construction
- Construction management agreements
- Major works and major project agreements
- Equipment and plant supply, installation and commissioing agreements
- Earthmoving contracts
- Plant hire agreements
- Testing and inspection contracts
- Underground and directional drilling contracts
- Oil and gas services construction agreements (pipeworks, inspection, upgrade and modification, compressor installation, etc.)
- Standards Australia, Masters Builders and HIA contracts
- Builder/subcontractor contract reviews
- Payment disputes
- Advising on liquidated damages claims and cancellation fees
- Construction insolvency advice
- Procurement strategies
- Advising on health and safety issues
- Due diligence advice
- PPSR advice
- Advising on construction related insurances
We also advise in relation to construction disputes, including mediation, adjudication and arbitration. To see our experience click here.
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Our notable experience includes:
- Acting for Coogee Group - Mitsubishi joint venture for construction and operation of $100m+ Port Bonython diesel fuel terminal, including FEED study, build, terminal services, terminal lease and shareholders agreements
- Preparing numerous construction contracts for Craig Mostyn Group, including construction contracts for:
- multiple abalone farm extensions in several locations across Australia, including at Australia's largest abalone farm
- multistage expansion of Western Australia’s largest pig abattoir, including new buildings and plant upgrades
- multistage construction of large commercial piggeries at Mogumber (six large buildings)
- multistage expansion of Western Australia’s largest meat and poultry waste rendering facility, including plant upgrades, new water treatment plant and new rendering line
- refit of the Group’s head office in Fremantle
- Preparing construction contract documents for Tier 1 international data centre operator for multi site upgrade program across Australia
- Advising Scott Park Group for many years in relation to corporate and construction matters
- Advising subcontractors supplying equipment and services to major resources projects including Inpex Icthys, Rio Tinto (various Pilbara), FMG Cloud Break, BHP Newman, and Main Roads WA projects (various in Western Australia)
- Preparing contracts for construction of a grain ship loader and heavy duty hopper, including dealing with cross border payment and security issues
- Preparing construction contracts for WA based premium home builder
- Preparing joint venture agreement for construction joint venture
- Preparing shareholders agreement for home building company
- Prepare construct and leaseback agreement for major plant hire company
- Advised CCM Group in relation to various construction related matters
- Advised Diab Engineering in relation to various construction related matters
- Prepared granny flat agreement for various clients
Williams + Hughes has significant experience advising in relation to construction related disputes, payment claims and debt recovery. Click here for more details
Commercial Law & Contracts
Williams + Hughes advise public and private companies and individuals across a wide spectrum of industries. Our range of commercial litigation expertise and experience, coupled with ready access to senior legal personnel and our responsiveness, makes us top choice commercial litigation lawyers in Western Australia.
We recognise that clients often choose their legal advisors based on their knowledge and understanding of the client’s industry. Our lawyers work hard to understand the commercial and technical drivers underpinning our clients’ industries, as this enables us to quickly and efficiently advise on complex and technical matters affecting their businesses.
Get in touch with our top tier commercial litigation lawyers in Perth or Geraldon to see how we can assist you.
What we do
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Damian Quail
PrincipalLLB, B.Com (Acc & Fin) (Hons) MAICD
EXPERTISE
EXPERIENCE
Damian is a Director and Principal of Williams + Hughes. He has practiced as a lawyer for over 28 years in the commercial, resources, agribusiness, software and technology fields. He has managed many large deals, including major investments, farm-ins and JV’s, asset and share sale deals, capital raising transactions and construction matters.
Damian acts for a wide range of clients, including ASX and TSX listed companies, large private family groups and small to medium enterprises. Damian has special expertise in M&A transactions.
Damian adopts a pragmatic approach with a strong focus on ensuring his advice adds value and allows clients to get deals done.
Damian has significant business experience outside of law. This experience helps ensure he does not waste time on legal points that are not commercially important. His past and current roles include:
- Director and Executive Producer at Perpetual Entertainment West and Director at Quail Entertainment, television production companies
- Board member of the Churchlands Senior High School Foundation
- Director of eight unlisted gold exploration companies
- President of The West Australian Mining Club 2019/20; Secretary 2017-2019; Committee Member 2015-2020
- co-founder of four start-ups in space launch, biotech and mobile app sectors
- founding Trustee of the Rotary Club of Crawley Charitable Foundation
- Analyst and Management Consultant at boutique investment bank (3 years)
- Senior Associate at Perth's largest law firm (3.5 years)
Damian is a current member of the Australian Institute of Company Directors, Energy and Resources Law and the Law Society of Western Australia.
Damian is based in our West Perth office. He is a regular legal CPD seminar presenter for the Law Society of Western Australia and Legalwise, where he has presented extensively on M&A topics. He is married with three children and enjoys making TV shows, travelling and playing indoor cricket.
Some of the significant matters Damian has advised on include:
Mining, resources and mining services
- Prepared numerous M&A agreements, farm-in agreements, joint venture agreements, land access and compensation agreements for listed and non-listed exploration companies.
- Prepared numerous subcontractor, procurement and hire agreements for mining services companies supplying to major resources construction projects
- Legal adviser to ASX-listed Image Resources for over 13 years in relation to numerous aspects of its Boonanarring and Atlas Mineral Sands Projects, including:
- negotiating and preparing numerous land access, compensation, option and acquisition agreements relating to mining on private land and on Crown leases.
- general day to day legal advice including FIRB approvals, exploration and mining agreements, petroleum pipeline easements and easements over adjoining properties.
- Australian legal adviser to TSX-V listed Novo Resources Corp. including:
- establishing Australian subsidiaries and serving as a Director 2010-2023.
- negotiating and preparing numerous farm-in, joint venture, sale and purchase and royalty agreements, including due diligence and transaction agreements with Creasy Group, Millennium Minerals, Artemis Resources, Comet Well vendors, Pioneer Resources, Calidus Resources, Northwest Resources, Nimble Resources, Talga Resources, Mesa Minerals and others.
- general legal and contracting work including heritage agreements, split minerals rights agreements, refining agreements, toll treatment, leases, access agreements, DMIRS compliance work, advising in relation to tenements issues, etc.
- legal compliance and advice including company secretarial work, FIRB applications, DMIRS compliance, employment issues, complex stamp/transfer duty matters and general day to day legal advice.
- Legal adviser to ASX listed Middle Island Resources for over 10 years on numerous matters, including:
- purchase of Sandstone Gold Project. Conducted legal due diligence and negotiated Asset Sale Agreement and related documents.
- sale of Sandstone Gold Project to Aurumin Limited. Negotiated Sale Agreement and related documents.
- bidding for Samira Hill gold mine in Niger. Extensive assistance with due diligence, advice in relation to Mining Code of Niger and negotiating sale agreement and related documents.
- proposed purchase of a Moroccan copper project.
- sale of project interests in Burkina Faso, Niger, Liberia and Western Australia, including negotiating farm-in and royalty agreements.
- Legal adviser to Coil Group and JT Metallurgical Services, including toll processing, mill operation and various service contracts.
- Legal adviser to Resource Mining, including in relation to purchase of Goongarrie Gold Project, contract mining agreement and contract variation iss
- Legal adviser to Titan Plant Hire and Territory Plant Hire, including in relation to numerous infrastructure and resources projects in Western Australia and Northern Territory.
- Acted for ASX-listed Apex Minerals in successfully restructuring of $87 million debt facility, including negotiations with security trustees and banks in New York and reset of debt facility, warrant deeds, security trust deeds, etc.
- Prepared oil and gas services agreements for Plexal for gas pipeline projects in Australia, Bangladesh and Thailand.
- Advised ASX-listed Cougar Metals in relation to Brazilian lithium project.
- Acted for Lime Industries Group in relation to limestone and sand mining.
- Advised ASX-listed Magnetic Resources in relation to acquisition of gold projects.
- Advised ASX-listed Mindax in relation to acquisition of gold projects, including farm-in agreements.
- Acted for ASX-listed Emu Nickel in relation to various minerals projects.
- Advised Australian investment company to set up Limited and General Partnerships in the Cayman Islands for investment in global resources opportunities.
Mergers & Aquisitions
- See above for mining and resources related M&A work.
- Acted for owners of Western Australia's largest hospitality supplies company, Hisco, on sale of business to French owned Reward Group.
- Acted for MBL on purchase of Southcoast Food Services business.
- Acted for INX Software shareholders on sale of majority stake in INX to private equity buyer Tanarra Capital.
- Acted for Perth Medical Laboratories (Perth’s largest independent pathology business) shareholders on sale of company to Australian Clinical Laboratories (private equity owned).
- Acted for buyer of Titan Digital and Titan Brand businesses (120 staff across Australia and South Africa).
- Acted for Craig Mostyn Group in numerous acquisitions and divestments including:
- assisted with aspects of the acquisition of V&V Walsh
- acquisition of Jade Tiger, Australia’s largest abalone farm
- acquisition of Australian Seafoods (abalone and rock lobster) in Dover, Tasmania
- acquisition of Fertal rendering business
- divestment of Fataway business
- divestment of Tasmanian seafoods business
- Advised vendor of HPC Data Centres on sale of data centre to ASX-listed Amcom.
- Advised vendors of Orelogy mining software on sale of software business to Maptek.
- Advised vendors of Orelogy Consulting business to Perenti.
- Advised Conducive shareholders on sale of IT services business to ASX-listed Empired Limited.
- Advised Silicon Valley based software company on purchase of Australian software business, including IP due diligence.
- Advised Wild Geese International (oil and gas safety and induction training) to ASX-listed Site Group International.
- Advised sellers of Ecologia to ASX-listed RDG.
- Advised numerous buyers and sellers in private M&A transactions, including involving vendor finance, earn-outs and funds escrow arrangements, including acting as escrow agent.
Pipelines, Tanks and Terminals
- Acting for Coogee Chemicals for many years, including:
- acted for the Coogee Chemicals - Mitsubishi joint venture regarding construction and operation of $100m+ Port Bonython diesel fuel terminal, including FEED study, build, terminal services, terminal lease and shareholders agreements and related documents
- negotiating multi-decade pipeline leases and easements in Kwinana industrial estate.
- negotiating multi-decade chlorine and caustic supply agreements.
- negotiating land access agreements and easements for pipelines, tanks, railway sidings, elevated pipebridges, etc in in Kwinana industrial estate and Kalgoorlie.
- acted for Coogee Chemicals in relation to sale of interst in Port Bonython Fuels
- negotiating industrial leases and licences.
Construction
- Advised subcontractors supplying services and equipment to major resources projects including Inpex Icthys Darwin, Rio Tinto (various Pilbara), FMG Cloud Break, BHP Newman, and Main Roads WA projects (various in Western Australia)
- Acted for the Coogee Chemicals - Mitsubishi joint venture regarding construction Port Bonython diesel fuel terminal- see above.
- Prepared numerous construction contracts for Craig Mostyn Group, including construction contracts for:
- multiple abalone farm extensions in several locations across Australia, including at Australia's largest abalone farm
- multistage expansion of Western Australia’s largest pig abattoir, including new buildings and plant upgrades
- multistage construction of large commercial piggeries at Mogumber (six large buildings)
- multistage expansion of Western Australia’s largest meat and poultry waste rendering facility, including plant upgrades, new water treatment plant, new boilers and new rendering line
- refit of the Group’s head office in Fremantle
- Prepared construction contract documents for Fujitsu for multi site data centre upgrade program across Australia
Software and IT related
- See above for software and IT related M&A work.
- Advised large private company in relation to moving from in-house IT solution to Telstra hosted Cloud environment (production, disaster recovery, backup).
- Advised large industrial company in relation to Oracle software licensing audit and licensing compliance, including compliance with licensing terms and challenging licence fees demanded for virtual machines and multiple software instances.
- Advised IT vendor entering USA market - prepared manufacturing, distribution, branding and licensing agreements.
- Advised ASX-listed property company in relation Microsoft Dynamics enterprise agreements.
- Prepared suite of software licencing, maintenance and support agreements for spatial software developer (Australia and USA).
- Prepared numerous software license agreements, distribution agreements, reseller agreements, EUSLAs, support and maintenance and service level agreements (including SaaS and Cloud Agreements), consulting contracts, etc for numerous Australian software companies.
- Reviewed and advised numerous clients in relation to IT procurement contracts.
- Prepared numerous website and app T&C's
- Advised many software, medical and mobile app start-ups in relation to business structuring, shareholder agreements, terms and conditions, fundraising documents, commercialisation agreements, manufacturing, distribution, branding and licensing agreements.