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Clearer guidance is needed on how section 15 of the new code changes will apply where clients have not met their SG obligations, according to the National Tax & Accountants’ Association.
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Clarity needed on section 15 and unpaid SG, says NTAA
26 November 2024
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The National Tax & Accountants’ Association (NTAA) has urged the Tax Practitioners Board (TPB) to provide further guidance on what a registered practitioner's obligations are under section 15 where they become aware that a client has not met their superannuation guarantee obligations.
In a recent submission to the TPB, the NTAA said it has been suggested that these situations will be captured by section 15 and in some cases, the practitioner may need to notify the Commissioner of Taxation.
"This is because the act of not paying the required superannuation obligation for each employee would be considered to have caused, is causing or may still cause substantial harm to the interests of those employees," the submission said.
The NTAA explained that the first issue that the practitioner would need to resolve is whether or not the client has made a false or misleading statement to the Commissioner concerning the underpayment of superannuation by the client.
"If the specific labels on the client’s tax return have been completed correctly, disclosing that no superannuation has been paid or that there has been an underpayment, then arguably there has been no false or misleading statement made to the Commissioner, despite the fact the superannuation has not been paid," the association said.
The association also noted that when a client has underpaid their quarterly superannuation liability for one or more of their employees, they are required to lodge a superannuation guarantee statement to the Commissioner disclosing the underpayment and paying the relevant amount and penalties.
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"If an SGC statement is submitted to the Commissioner with incorrect or incomplete information, then this will undoubtedly amount to a false or misleading statement being made to the Commissioner," the NTAA said.
"However, if the client chooses not to lodge the SGC statement, then no statement has been made to the Commissioner, so arguably section 15 has no application."
The NTAA said while the TPB provides a case study in its guidance – case study 6, which explains how section 15 could apply in respect of a client's superannuation guarantee obligations – it does not provide detail on how the false or misleading statement was made to the Commissioner in the first place.
"If the company in the case study made the false or misleading statement to the Commissioner by incorrectly reporting their deductible superannuation expense in an income tax return, are the registered practitioner’s obligations under section 15 limited to the correction of the tax return?" it said.
The association said that if it is the TPB's view that clients make a false or misleading statement when they fail to lodge an SGC statement when required, then the registered practitioner in case study 6 would arguably have obligations under section 15 with regard to the SGC statement that should have been lodged.
If the TPB intends to apply section 15 in this way, the NTAA said the TPB must provide guidance on whether this link of thinking would also apply when a client has not lodged their income tax return.
"It would be beneficial for the TPB to specifically address this circumstance to provide some clarity on this issue, as it will be a circumstance that many registered practitioners will encounter in their practice," it said.
The NTAA said the TPB should also clarify in the case of unpaid super whether the registered practitioner’s obligations under further action in the public interest extend to notifying all impacted employees.
"Requiring the practitioner to do so would create an unreasonable administrative burden on the practitioner as practitioners are unlikely to have the required information at their disposal," it said.
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