Practice Statement Law Administration

PS LA 2007/10

Making default assessments: section 36 of the Superannuation Guarantee (Administration) Act 1992

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This Practice Statement outlines the guidelines in relation to issuing a default assessment under section 36 of the Superannuation Guarantee (Administration) Act 1992.

1. What this practice statement is about

Employers are required to make the minimum prescribed superannuation guarantee (SG) contributions for employees. In doing so, they also need to comply with the choice of fund requirements.^[1]

If they do not meet either of these obligations, employers will have an SG shortfall and must lodge an SG statement for the relevant quarter by the due date^[2] - which is the 28th day of the second month after the end of the quarter. The first statement lodged for a quarter is taken to be an assessment of the SG charge.

If an employer does not lodge the SG statement and we are of the opinion that the employer is liable to pay the SG charge (SGC)^[3] for the quarter, we may then make a default assessment of the SG shortfall and the SGC payable on the shortfall.^[4]

This Practice Statement outlines when a default assessment can be made and the factors to consider in making the default assessment.

These principles apply equally to amending an existing assessment - either one lodged by an employer or a default assessment previously made.

All legislative references in this Practice Statement are to the Superannuation Guarantee (Administration) Act 1992 (SGAA), unless otherwise indicated.

2. Points to consider before making a default assessment under section 36 of the Superannuation Guarantee (Administration) Act 1992

When making your decision, consideration should be given to:

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Has the employer lodged an SG statement? If so, you cannot make a default assessment under section 36. However, you can amend an assessment under section 37.

•

In all but very limited circumstances, employers should be informed of your intention to make a default assessment, as well as the basis upon which it will be calculated, prior to the assessment being made.

This allows employers the opportunity to ensure that an accurate assessment of their SG liability has been made. It will ease costs for the employer in meeting their obligations and may also lead to a reduction in disputes.

Exceptions to this general principle would be where there is:

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a risk of flight by the employer

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a risk of the dissipation of assets or movement of funds, or

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a history of the employer being uncooperative.

3. Gathering information to make an assessment

When gathering information to ascertain whether the employer has an SG liability, best practice is to start with the employer themselves.

Before invoking our formal access and information-gathering powers, you should initially request the information on an informal basis.

However, if the employer does not respond satisfactorily to informal requests for information, you should then consider whether our formal powers will be more appropriate. Our formal powers include:

•

issuing a notice^[5] requiring an employer to provide a written statement in the approved form stating if the person has an SG shortfall, and

•

issuing a notice under subsection 353-10(1) of Schedule 1 of the Taxation Administration Act 1953, requiring a person to do all or any of the following

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give the Commissioner any information or documents under their control, and

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attend and give evidence before the Commissioner.

4. Making the default assessment

Where no information is provided or the information provided is not satisfactory, you may make a default assessment based on the information we have available.

Information sources, other than the employer, that may provide a reasonable basis for the default assessment to be made include:

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the employee - via an employee notification form or employee questionnaire

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ATO systems - for example, payment summaries, previously lodged SG statements, Single Touch Payroll data, employer or employee tax returns or superannuation fund data, and

•

third parties - including superannuation funds and the Australian Bureau of Statistics, which has statistical data regarding different industries.

Your decision in relation to the default assessment must be defensible, sound and in accordance with:

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relevant laws

•

the commitments made in Our Charter

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the principles of the Compliance model, and

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the Good decision-making model (link available internally only).

Your decision must be documented in the relevant ATO case management systems, outlining why you decided the employer has an SG shortfall and the process you used to calculate the SGC.

As a general rule, we will only make assessments for quarters that the employer is required to have retained records. However, if there is sufficient written evidence of an SG shortfall, and that liability can be determined^[6] with a fair degree of certainty, you are able to raise assessments for previous quarters.

Written evidence which may sufficiently quantify an SG shortfall includes, but is not limited to:

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payment summaries

•

payslips, and

•

superannuation fund statements.

The Commissioner must give written notice of the default assessment.

5. Employer defences

When formulating your decision to make a default assessment, you must also consider the scenarios outlined in PS LA 2007/1 (GA).

The employer may also provide other supporting documentation (for example, bank statements) that may indicate evidence that SG contributions have already been made, which could demonstrate that they do not have an SG liability.

However, if the employer does not keep the required records, they are not able to raise their own failure as a defence against the making of a default assessment.^[7]

An exception to this may apply where employers are impacted by a natural disaster and relevant records are lost or damaged. In this situation, an employer may seek assistance from us to estimate how much SG to pay.

If an employer has to wind up their business as a result of a disaster, they will still need to pay any outstanding super obligations for their employees before finishing up. We recommend that employers in this situation lodge an SGC statement as soon as possible.

6. Penalties - additional SGC

If an employer (other than a government body) refuses or fails to provide, when and as required under the SGAA:

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an SG statement, or

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other information relevant to assessing the employer's liability to pay the superannuation guarantee charge,

the employer is liable to pay a penalty of additional SGC - equal to double the amount of SGC payable for the quarter.^[8]

Note: An administrative penalty may also apply under the TAA where we raise a default assessment. However, the penalty should generally be remitted in full. Law Administration Practice Statement PS LA 2021/3 Remission of additional superannuation guarantee charge provides guidance on remission of this penalty when additional SGC penalty is assessed.

7. Review rights

An employer who is dissatisfied with a default assessment or amended assessment may object to the assessment under Part IVC of the Taxation Administration Act 1953.

8. Judicial examples of sustainable default or amended assessments

Pye and Commissioner of Taxation

In the case of Pye and Commissioner of Taxation [2004] AATA 143, default assessments were made based on copies of payment summaries lodged by the applicant with the Commissioner. The figures obtained from the payment summaries were used to calculate the shortfall, which represented an amount that, in the Commissioner's opinion, was reasonably expected to be the shortfall. The SGC had thus been correctly imposed.

David Christie as Trustee for the Moreton Bay Trading Company and Commissioner of Taxation

In the case of David Christie as Trustee for the Moreton Bay Trading Company and Commissioner of Taxation [2004] AATA 1396, the Commissioner relied on payment summaries and some pay records to make default assessments. The employer objected against the default assessments and the objection decisions were affirmed. McCabe J was unable to fault the reasoning or calculations contained in the objection decisions.

Favaro, Gerald Antonio & Anor v Commissioner of Taxation

In the case of Favaro, Gerald Antonio & Anor v Commissioner of Taxation [1996] FCA 877, the ATO used Australian Bureau of Statistics Household Expenditure Survey data to estimate the applicants' living and personal expenses. The applicants claimed that they lived, in the relevant years, more frugally than the hypothetical average individual.

However, the Federal Court held that the Commissioner had not acted on a wrong basis so far as his estimates of the applicants' living and personal expenses were concerned.

Case A17

A similar result was found in Case A17 1 NZTC 60, where the taxpayer's earnings were estimated by comparison with the earnings of other taxi drivers, although the assessment was reduced on the basis of evidence of greater than average fuel consumption for that particular taxpayer.

Armirthalingam and Commissioner of Taxation

In the case of Armirthalingam and Commissioner of Taxation [2012] AATA 449, amended assessments showing understated income were made relying on 'player rating transaction reports' and 'player monthly transaction reports' created by a casino. The Administrative Appeals Tribunal held that the reports were sufficiently accurate to be relied upon when making the assessment.

9. Other examples

Example 1 - reason to amend default assessment

We make a default assessment that relates to 5 employees. Information becomes available that clearly shows the employer has an SG obligation for a sixth employee. We may amend the default assessment.

Example 2 - correcting or amending assessment

The employer gives us an SG statement showing details of an SG liability for 3 employees. It is identified, either by us or the employer, that there is an obligation for a fourth employee.

You may amend the assessment to make additions or corrections you think necessary to correct the assessment, or you may amend the assessment at the request of the employer.

Example 3 - amending assessment after record-keeping period has ended

An employee notifies us that their former employer has not paid superannuation guarantee for them for a period more than 5 years ago.

The employer is not required to have retained their records and therefore we require sufficient written evidence from the employee to determine the liability exists.

The employee provides payslips, a payment summary and their superannuation fund statement which proves an unpaid SG liability exists. As a result, we may raise a default assessment for the SG shortfall and the SGC payable on the shortfall for the period that the employee has supporting documentary evidence.

10. More information

For more information, see:

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Law Administration Practice Statement PS LA 2007/1 (GA) Assessing superannuation guarantee charge where the employers have done what they could reasonably be expected to do to comply with the law by the due date

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Law Administration Practice Statement PS LA 2014/4 Default assessment penalt

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Law Administration Practice Statement PS LA 2021/3 Remission of additional superannuation guarantee charge

Amendment history

© 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).

Date of Issue: 26 April 2007

Date of Effect: 26 April 2007

File 06/17602

Related Practice Statements:
PS LA 2007/1 (GA)
PS LA 2014/4
PS LA 2021/3

Other References:
Compliance model
Good decision-making model (link available internally only)
Our Charter

Legislative References:
SGAA 1992 32C
SGAA 1992 33(1)
SGAA 1992 33(1A)
SGAA 1992 34
SGAA 1992 36
SGAA 1992 37
SGAA 1992 59
TAA 1953 Pt IVC
TAA 1953 353-10(1)

Case References:

Armirthalingam and Commissioner of Taxation
[2012] AATA 449
2012 ATC 10-260
90 ATR 204

Case A17
1 NZTC 60, 144 Board of Review

David Christie as Trustee for the Moreton Bay Trading Company and Commissioner of Taxation
[2004] AATA 1396
2005 ATC 2009
58 ATR 1142

Favaro, Gerald Antonio & Anor v Commissioner of Taxation
[1996] FCA 877
96 ATC 4975
(1996) 34 ATR 1

Pye and Commissioner of Taxation
[2004] AATA 143
2004 ATC 2029
55 ATR 1024

Stone v Federal Commissioner of Taxation
(1918) HCA 67
(1918) 25 CLR 389

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