Practical Compliance Guideline

PCG 2020/6

Timing of income tax deductions for superannuation contributions made through the Small Business Superannuation Clearing House - ATO compliance approach

• There is a Compendium for this document: PCG 2020/6EC .

What this Guideline is about

1. This Guideline describes circumstances in which the Commissioner will not apply compliance resources to determine which income year an employer is entitled to claim income tax deductions for super contributions made through the Small Business Superannuation Clearing House (SBSCH) to a super fund or retirement savings account (RSA).

Background

2. Section 290-60 of the Income Tax Assessment Act 1997 (ITAA 1997) allows an employer to claim income tax deductions for contributions made to a super fund or RSA, on behalf of employees, where certain conditions are met. The income tax deduction is only available in the income year the contribution is made.^[1]

3. Super contributions are made to a super provider or RSA when the payments are received by the trustee of a complying super fund or an RSA.^[2]

4. Section 23B of the Superannuation Guarantee (Administration) Act 1992 (SGAA) specifies that employer payments made to an approved clearing house are taken to be contributions made on the day they are accepted^[3] by the approved clearing house. This is only for the purpose of determining whether an employer is liable for the super guarantee charge^[4] and does not extend to determining when an employer is entitled to claim a tax deduction.

5. The SBSCH is the only approved clearing house and is administered by the ATO.^[5] The SBSCH is a free service that small businesses with 19 or fewer employees, or an annual aggregated turnover of less than $10 million, may use to make super contributions. The service aims to reduce compliance costs for small business employers by simplifying and streamlining the process of making employee super contributions. It allows employers to make a single lump payment of their contributions to the SBSCH each quarter. That lump sum payment is broken into individual payments to be contributed to each employee's respective super fund or RSA.

6. There may be a period of time between an employer's payment to the SBSCH and the trustee of a complying super fund receiving the contribution. The SBSCH may be unavailable over a weekend close to the end of the financial year for scheduled system maintenance.^[6] Payments made towards the end of an income year may not be received by the trustee of a complying super fund or an RSA in the same income year. This may impact on when an employer is entitled to an income tax deduction for the super contributions.

Date of effect

7. This Guideline applies both before and after its date of issue.

Who this Guideline applies to

8. This Guideline applies to you if:

•

you, as an employer, or your nominated representative on your behalf, made payments to the SBSCH on behalf of your employee before close of business on the last business day of the income year in which you deduct the contribution

•

at the time of making the payments, you provided all relevant information to enable the SBSCH to process the payment to the employees' super fund accounts or RSA^[7]

•

the payment has not been dishonoured by the super fund or RSA^[8] or returned to you by the SBSCH^[9]

•

you would otherwise be entitled to the income tax deduction.^[10]

9. This approach will not apply where you deduct a contribution in an income year where the payment is made through a clearing house other than the SBSCH (a commercial clearing house). Typically, the contract between an employer and the commercial clearing house will set out the terms and conditions of the agreement between them, including the service standards for processing payments. Some commercial clearing houses will indemnify employers for any loss incurred where the clearing house was in breach of their service standard. Employers should check the service standards with their clearing house.

Our compliance approach

10. We will not apply compliance resources to consider whether the contribution you made was received by the trustee of the super fund or RSA in the same income year in which you made the payment to the SBSCH, provided you made the payment to the SBSCH before close of business on the last business day on or before 30 June.

11. As a consequence of this compliance approach, where the conditions in paragraph 8 of this Guideline are satisfied, you do not need to check with your employees' super funds to determine in which income year the contributions were received from the SBSCH prior to claiming an income tax deduction in the income year the payment was made to the SBSCH.

12. You will need to check that you meet the requirements in paragraph 8 of this Guideline for each year you wish to rely on this Guideline.

13. While system availability mentioned in paragraph 6 of this Guideline may impact on the timing of the receipt of the payments by the trustee of a complying super fund or an RSA from the SBSCH, our compliance approach outlined in paragraph 10 of this Guideline is not limited to circumstances where this has occurred.

Commissioner of Taxation
3 June 2020

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Previously released in draft format as PCG 2019/D8

ATO references: File 1-G1I57RP

Business Line:  SEO

Related Rulings/Determinations:
TR 2010/1
SGD 2005/2

Legislative References:
ITAA 1997 Subdiv 290-B
ITAA 1997 290-60
ITAA 1997 290-95
SGAA 1992 23A
SGAA 1992 23B
SGAA 1992 79A
SGAR 2018 24

Case References:
Liwszyc v Commissioner of Taxation
[2014] FCA 112
218 FCR 334
2014 ATC 20-441
94 ATR 16
[2014] ALMD 4472

Other References:
Small Business Superannuation Clearing House Clearing house terms and conditions