JobKeeper and Compulsory Superannuation Guarantee

Tax Insights

The Coronavirus Economic Response Package (Payment and Benefits) Rules 2020 (JobKeeper rules) were registered by the Treasurer on 9 April 2020.

JobKeeperMany employers have now registered and are receiving JobKeeper reimbursements from the Australian Taxation Office (ATO) for eligible wages paid in April 2020.

While this is great news for many business owners, questions remain about the requirement for employers to calculate and pay the compulsory superannuation guarantee on amounts paid to employees solely to satisfy the JobKeeper minimum wage condition.

Throughout the COVID-19 crisis, Treasury has consistently communicated a clear message, it is the intention of the government that the compulsory superannuation guarantee should only be payable where wages paid to employees under the JobKeeper scheme represent the ‘actual’ employment of the employee. 

The intent of the government to ‘top-up’ payments, or other payments made to employees solely to satisfy the JobKeeper minimum wage condition (e.g. where the employee was stood down on no pay), would be disregarded where the amount did not relate to the ‘actual’ employment of the individual.  We understand ‘actual’ employment to mean where the employee was required to work in the business and the payment represented the ordinary time earnings of that employee.

Treasury indicated in the Explanatory Statement (ES) to the JobKeeper rules that further amendment would be required to modify the operation of the Superannuation Guarantee (Administration) Act 1992 in order to ensure employers would only need to make superannuation guarantee payments in respect of amounts payable to an employee in respect of their ‘actual’ employment. 

The amendments were proposed to be made by changes to superannuation guarantee legislation or by the issue of regulations.  To date, legislation or regulations have not been introduced or passed by Parliament and there have been no further updates from Treasury as to when this may occur.

AsJobKeeper Parliament is not scheduled to sit again until 10 June 2020, the lack of legislative change to the superannuation laws presents a real risk to employers, as existing law will apply until such time the law is changed.  Employers who do not satisfy superannuation guarantee obligations under existing law may be exposed to a liability for a superannuation guarantee charge, penalties, and in some cases, personal liability. 

While this does not appear to be the intent of the government, existing law will apply until legislation is passed or regulations issued to change the superannuation rules to exclude certain payments made to employees to satisfy the minimum wage condition under JobKeeper. 

Technically, this means all ‘wages’ paid to employees to satisfy the JobKeeper minimum wage condition, irrespective of the work undertaken, may need to be considered when calculating an employer’s superannuation guarantee liability.

This issue is further complicated where small business owners wish to claim a tax deduction in the 2020 year for compulsory superannuation contributions made in respect of the April to June 2020 quarter.

JobKeeperSmall business owners who use the small business superannuation clearing house have historically been required to make payments by 20 June 2020 in order to claim a tax deduction in the 2020 year. 

The early cut-off date was to allow time for the small business superannuation clearing house to process payments and ensure contributions were allocated to respective employees complying superannuation funds. 

For business owners who pay directly to the employee’s complying superannuation funds, timing is equally critical, as the contributions will need to be received by the fund and applied to the employee member balance prior to 30 June 2020 in order for the business to claim a tax deduction in the 2020 year.

With 30 June 2020 fast approaching, and without the required amendments to superannuation legislation, employers will be faced with a difficult decision as to whether they take on the additional financial burden of meeting superannuation obligations they had not anticipated, or breach existing superannuation laws and hope the government subsequently introduces (and passes) retrospective legislation or regulations.

As Treasury has consistently communicated the message that even in emergency situations employers are still required by law to continue superannuation guarantee liabilities when they fall due, an urgent update is necessary for when businesses can expect to see the promised JobKeeper amendments to superannuation laws. 

Clarity is required urgently to ensure employers are not placed in a position where they breach compulsory superannuation obligations and face significant penalties as a result of relying on media releases and announcements made by Treasury rather than complying with existing law.

For further information

If you require any further information on JobKeeper and Compulsory Superannuation Guarantee, please contact your local RSM office

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