The ATO ‘doesn’t want to budge’: A tax specialist on the surge in SGC letters

“They were told that they need to lodge the superannuation guarantee charge statement by a certain date. There was an indication about the interest charges of 10 per cent. The owner said they paid their super, but it was paid a little bit late, but that was not intentional. It was due to cash flow issues.”

Saby said his firm – which is a team of tax and debt management specialists and tax dispute specialists – communicated to the ATO on behalf of the employer that the superannuation guarantee was paid and attempted to negotiate on the 10 per cent interest charge the employer faced.

However, he said the ATO “doesn’t want to budge because the law is the law”.

“I want to ask if the law is being applied in a just and equitable manner,” Saby said.

“I understand that the government needs money and it is not an interest-free bank. But I think my request to the commissioner of taxation is to be a little patient with small businesses and give them the benefit of the doubt to explain their position. I would say don’t do a blanket application of the law.”

Saby’s comments have come after the ATO was grilled by the Senate Economics Committee on its data matching systems after federal shadow treasurer Tim Wilson expressed outrage with the ATO’s systems, which it uses to justify sending SGC letters.

“One of the things that's most distressing we're asking about in the Senate… is they're now matching Single Touch Payroll data with superannuation data and saying if there's any discrepancy that they're assuming a small business hasn't paid super on time, even though they have no evidence to substantiate that, and threatening small businesses with 200 per cent fines if they don't basically bow to the ATO's demands,” federal shadow treasurer Tim Wilson said on a 3AW interview last week.

“We believe very strongly the ATO should respect taxpayers.”

Saby said this is a “real” and rampant issue which he is witnessing regularly, adding that the ATO cross-matches Single Touch Payroll data against SuperStream contribution receipts.

“Any mismatch, even a day or two, gets flagged as a potential superannuation guarantee shortfall,” he warned.

“The core issue is that under the current quarterly SGC regime, a late payment doesn’t cure the SGC liability. It crystallises at the missed deadline regardless of later payment to the fund. Single Touch Payroll and SuperStream now surface these automatically and at scale, often before the employer realises there was a timing issue.”

In addition, while the 200 per cent Part 7 penalty is existing law under the SGA Act, Saby said new detection capabilities mean that strict liability and automated matching is a harsh combination for employers who paid in good faith, albeit a few days late.

“On Tim Wilson's point, the ATO isn't fabricating discrepancies,” Saby said.

The matching is catching genuine timing gaps. The real issue is proportionality of the 200 per cent uplift where payment was made but simply timed wrong, and whether ATO correspondence distinguishes that from genuine non-compliance.”

Saby said he believes the challenge lies in the limited human intervention because humans can differentiate between genuine hardship cases where business owners could not pay super on time because of cash flow issues and those who fail to comply intentionally.

“If the employees are complaining about their employer, go after that employer,” Saby said.

“But what if, for instance, the employer and employee already have a mutual understanding that the employer might pay super a bit late for a short period of time due to cash flow constraints? Have we considered that?”

Saby urged business owners to consult with tax professionals and lawyers who have the capability and capacity to manage these types of complex tax disputes so they can engage early with the ATO.