The tax office has admitted it will waive penalties for hundreds of businesses that have admitted failures to pay superannuation to their staff in the wake of a 'botched' amnesty.

The proposed amnesty to employers who failed to pay super entitlements stretching back to the early 1990s, was a federal government initiative rolled out in May last year to encourage employers to "wipe the slate clean" and pay workers their super entitlements. Unpaid super is estimated as being worth up to $6 billion a year.

IPA's Tony Greco says the ATO failed to clearly flag to taxpayers that there was uncertainty over the amnesty. Credit:Peter Braig

Almost a year later the policy has now been dumped despite the Coalition’s press release from May 24 saying the 12 month amnesty will run "from today".

The release warned that anyone who failed to take advantage of the amnesty and then caught would face higher penalties of at least 50 per cent of the money owed, on top of the unpaid super.