Revenue NSW has issued Practice Note CPN 021 providing clarity of the treatment of corrective Superannuation contributions and Superannuation Guarantee Charge payments in NSW.


The correction of Superannuation has been headline news following a number of high profile Fair Work undertakings, the introduction of the Superannuation Amnesty and an significant increase in Superannuation audits from the ATO. Whilst there was previously guidance as to what components of a Super Guarantee Charge (”SGC”) formed taxable wages for Payroll Tax purposes (in the form of PTA030), there was a degree of uncertainty as to what financial year these corrective payments would give rise to a payroll tax liability.

The new practice note, which applies only to NSW, provides clarity of the Payroll tax concept for Superannuation to be included on a ‘paid or payable’ basis for these two common scenarios;

  1. If an employer pays additional wages to an employee as a result of under-paying wages that were due in a previous financial year, any additional Superannuation contributions as a result of the shortfall are payable when the additional wages are paid; and
  2. If wages were originally paid, but a shortfall of Superannuation Guarantee arose requiring the lodgement of a SGC statement, the inclusion of the Superannuation Guarantee shortfall arises;
  • If the SGC assessment is issued by the ATO, the SGC is taken to be payable on the date on which the original default assessment is made; or
  • If an employer lodges the SGC Statement, the payroll tax is payable at the time the SGC Statement is lodged (not when the SGC charge is settled)

This clarifies that in both scenarios the payroll tax inclusion aligns to the time of the corrective action - there is no requirement to amend and include in the prior year when the Superannuation was originally due.

What about the wages component of a shortfall?

It is important to highlight that this applies only to Superannuation. In the scenario of an underpayment of wages, the wages component would need to be included in the Payroll Tax return in the year in which the payment of wages should have been made. This includes where the payment is made by a third party for the benefit of an employee of the employer.

What about additional compensation payments?

The Practice Note also confirms that an additional amount paid to an employee as compensation is not “wages” and therefore is not subject to payroll tax. However, employers must maintain records that prove to the satisfaction of the Chief Commissioner that a payment is compensatory in nature and is not ordinary wages.

What about the other states?

Whilst the states have enacted a number of harmonisation measures since 2007, the above Practice Note applies only to NSW. This wouldn’t be the first time that the states have not had a cohesive approach to the inclusion of taxable wages in more intricate areas of the law. As such, it is important to seek advice on the best way to handle multi-jurisdictional corrections given the different legislation interpretation that may apply.

The Practice Note provides much needed clarity to the corrective action for Superannuation Guarantee shortfalls. Importantly the decision to treat the inclusion in the year of correction helps to avoid additional administrative burden, interest and penalties on Superannuation shortfalls. Notwithstanding, we highly recommend advice is taken when taking corrective action as we are seeing a significant increase in Payroll Tax Audit activity from data matching, the broader ramifications of which can encompass all areas of Payroll tax compliance.


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