Employer SGC and the ATO

With the removal of the $450 monthly wage threshold and increase in the Superannuation Guarantee Charge (SGC) rate to 10.5% of wages for super guarantee payments (referred to in our recent newsletter) it is a good time to remind everyone of the penalties that can be incurred for not paying employee super on time.

Superannuation is required to be paid 28 days after the end of each quarter (see below).

If super is not paid by the due date not only does it lose its tax deductibility (which can be a significant penalty in itself) you also run the risk of falling foul with the Australian Taxation Office (ATO).

The penalties for not paying on time can be hefty – up to 200% of the original amount if your matter proceeds to an ATO audit. These penalties are legislated so negotiating a reduction with the ATO is often not possible even if there are legitimate reasons for the late payment of super.

It is also worth bearing in mind that the monies must hit the employees super fund by the due date. Depending on the clearing house you use, it is good practice to make the payment a few days prior to ensure it clears in time.

If you do find yourself in a situation where you have paid your super late or have historical issues relating to unpaid super, the key to avoiding penalties is engaging with the ATO as soon as possible.

You will need to prepare and lodge superannuation guarantee statements detailing the shortfall amounts for each employee to report the late payment. If you ignore the issue and then are subjected to an ATO audit they are likely to levy the maximum penalty available. The late payment goes direct to the ATO and they will process and onforward the super and interest component to the employee’s super fund.

The ATO has a useful online tool to assist you to calculate the SGC liability for your employees, which you can access here.  And of course, we are here to help you if you need any assistance as well.

By law, company directors are personally liable for unpaid super, and any penalties resulting from late payments. This means that if you fall behind in your superannuation obligations, the penalty is not restricted to the business entity and will impact on your directors. 

If you do find it difficult to meet the quarterly demands of paying employee super, switching to a monthly cycle can be a good strategy. It can also assist with cash flow budgeting as you are paying monthly rather than quarterly

If you require any assistance with meeting your employee super obligations please get in touch with a member of our business and personal advisory team.