‘Aggressive’ SGC letters from the ATO come rolling in

Accountants Daily viewed one of these letters in which the ATO lists the quarters that the tax agent’s small business client purportedly missed in its SG obligations, with instructions to lodge a SGC statement for each period.

While an ATO spokesperson told Accountants Daily that it has issued “SG nudge letters” for several years, this restructuring expert told the brand that these small businesses believed they were compliant until they received the SGC letter.

“It’s a demand for payment. It’s in the same colour as a director penalty notice; it’s in their credit reporting bureau … [in] their severe recovery tools, they use the same colour scheme,” described Eddie Griffith (pictured), chairman at the Affiliation for Business Restructuring and Turnaround.

Griffith said these clients thought they had paid on time; however, they were shocked by letters with no prior warning.

“They’ve thought they paid on time, and now suddenly, out of the blue, they’re being treated as if they’re a non-compliant taxpayer, and the letter is pretty aggressive,” Griffith said.

“There should have been a much clearer letter issued by the ATO — one that doesn’t effectively label taxpayers as non-compliant. This creates a poor compliance history with the ATO, but the accountant now has to clear their name; otherwise, that particular business owner, if they ever require a payment plan, if they ever acquire some more time to pay, if they ever require, god forbid, some sort of restructuring, the ATO will take into account this compliance; they will mark them down as being non-compliant for payments of super, and potentially from five years ago,” he said.

Some of the quarters for the unpaid or late super in the 30 examples that Griffith viewed went back as far as the September 2021 quarter, with one listing 19 consecutive quarters and another listing a shortfall of more than $96,000 across 67 employees in a single quarter.

The ATO collects this information from employer reports through single touch payroll (STP) and from super funds through SuperStream, along with data matching and risk models.

“Where available data indicates a potential SG shortfall, the ATO may issue an SG nudge letter to the employer, providing an opportunity for employers to review their records, correct any reporting errors and, where necessary, bring SG contributions up to date before further compliance action is considered,” the ATO spokesperson said.

Griffith said tax agents are placed in a difficult position when their clients receive these letters, and the ATO needs to do more to support struggling businesses.

“I would allege this is a fundamental failing, and something that they should have considered in the buildup to Payday Super,” Griffith said. 

“This does not instill accountants with confidence that the ATO is going to show that same discretion with regard to clearing times and receipt of funds.” 

“It’s the approach that’s wrong … Don’t just make it a taxpayer/accountant problem and just launch this enormous problem at the accountant. This means that the accountant has to go back over all of those quarters and reconcile the position. It is an enormous time burden, and it’s potentially unbillable.”

Payday Super requires employers to pay employees’ super on payday, making them liable for any late payments caused by clearing house delays.