Wage underpayment disclosures

If you have underpaid wages, notifying us early may reduce penalties.

We encourage employers to report wage underpayments as soon as they are identified. We actively pursue cases where employers may not be complying with their obligations. Early disclosure helps minimise penalties and interest.

If your business has underpaid workers, it might owe more payroll tax if the wage bill exceeds the monthly threshold. 

Identifying wage underpayment

An underpayment can be intentional or an honest mistake. An underpayment of wages occurs when:

• an employer does not pay wages to an employee when they are due, or
• payments made on behalf of the employee (e.g. superannuation) are not made on time.

Payroll tax implications

Payroll tax liabilities arising from underpayments are determined by the timing of payments:

• Wages are subject to payroll tax based on when they are paid or payable, whichever occurs first. We may assess or reassess payroll tax liabilities related to underpayments beyond 5 years.
• Wages include superannuation contributions and the Superannuation Guarantee Charge. These contributions or charges are ordinarily taxed based on when they are actually paid.

What to tell us

• The nature of the underpayment.
• When it happened.
• If back payments have been made or are in progress.
• Whether there are any court orders in place or legal proceedings underway.
• Whether there is an enforceable undertaking.
• What steps you have taken to avoid it happening again.

Make a voluntary disclosure

Next steps

Once we receive your disclosure, we will guide you through the next steps.

Penalties and interest

If you tell us about a problem before we find out through an investigation, you pay:

• market interest, and
• the lesser of either:
  • 8% per annum premium interest
  • penalty tax of either 5% (for taking reasonable care) or 15% (for intentional disregard).

If wage underpayments are identified due to our compliance activities, penalty tax will apply.

• 20% penalty tax applies if a full disclosure is made after the investigation has commenced. 
• Up to 90% penalty tax applies if there is intentional disregard of a taxation law with concealment/hindrance during investigation.

For more details, refer to revenue rulings PTA-036v5 Interest and penalty tax and TAA-007v5 Interest and penalty tax.