have you paid your superannuation late

Have you paid your superannuation late?

Superannuation Guarantee Charge

As compulsory superannuation has been around for over 20 years, I would hope that at this point in time all employers know that superannuation guarantee is payable on their employees’ ordinary time earnings, which excludes overtime and a few other things. What I have come to realise is that a lot of employers just don’t know how important it is to ensure that it is paid, in full and on time, as failing to do so can have significant consequences.

Superannuation liabilities can add up to a fair amount over a quarterly period. Most businesses also have their GST, PAYG Withholding and Instalments due around the same time so cash flow can dry up a little. It is then that it might be tempting to just not worry about paying the superannuation contributions by the due date. No one ever complains, you don’t have the ATO calling you asking for payment or creditors withholding supplies because of overdue accounts, so it’s an easy one to leave off the list. And that is where you get caught.

Having dealt with a couple of these situations recently, the employers had no idea of exactly what it meant if they paid their superannuation late, even by one single day.

Tax implications and paying more

As soon as superannuation guarantee is late, it becomes what is called Superannuation Guarantee Charge (SGC). The most drastic consequence of SGC to the employer is that those contributions can no longer be claimed as a tax deduction. If you are trading through a company structure, this means that you have effectively lost 30% of the value of the superannuation contribution in tax. Secondly, the superannuation guarantee charge is now calculated on the full salary and wage amount which includes overtime, allowances, etc.

So now, not only is what you have to pay not deductible but you also have to potentially pay a lot more.

As the employer, you are also required to complete superannuation guarantee forms and lodge these with the ATO. This can be quite a tedious process. From completing these forms, an interest amount (currently 10%) is calculated on the overdue SGC which is calculated from the first day of the quarter that the superannuation guarantee wasn’t paid to the day that the forms are lodged. The ATO also charges a $20 administration fee per employee, per quarter for which superannuation has been paid late in order to process these forms. When you lodge these forms you are then to pay the ATO for any amounts calculated and not directly to the employee’s nominated funds.

If you fail to complete these forms and just pay the superannuation contributions late don’t think you’re out of the woods. If you get an audit later on by the ATO (who can look back up to 4 years) you will be required to fill the forms out and pay the interest amounts right up until the day they are eventually lodged, regardless of when you actually paid the superannuation contributions. These payments can be applied to reduce the SGC amount payable for each employee, but it won’t reduce the interest charge that’s calculated.

Other penalties

There are other penalties the ATO can impose if the forms are never lodged and default superannuation guarantee charge assessments are raised. This can be up to 100% of the superannuation guarantee shortfall amount.

Are the penalties negotiable?

The commissioner has no discretion to reduce the interest, administration charge or allow deductibility of the contributions of paid late. This is because the SGC legislation is there to protect employee entitlements and is written with no concessions.

So, next time it comes time to pay superannuation guarantee at the end of the quarter make sure that it makes the top of your list.

Below is a table showing the due dates for each of the 4 quarters:

Quarter Period Due date
1 1 July – 30 September 28 October
2 1 October – 31 December 28 January
3 1 January – 31 March 28 April
4 1 April – 30 June 28 July

 

As a side note, the Government tried to introduce amendments to the Superannuation Guarantee Charge last year that were to take effect from 1 July 2016. These amendments were dropped earlier this year so as to not reduce the penalties for non-compliance in this area.

8 thoughts on “Have you paid your superannuation late?”

    1. Hi Max,

      Thank you for your inquiry below:

      Max
      “Does SGC include the accrued annual leave then? I know the SG only considers the ordinary time earnings.”
      https://www.quillgroup.com.au/blog/have-you-paid-your-superannuation-late/

      That’s is correct, SG is paid only on what is classified as Ordinary Time Earnings (OTE). Annual leave is one of the categories that is considered to be OTE, so is subject to SG.

      If you are required to pay or receive an annual leave loading under an award, the loading amount is not considered OTE so SG is not required to be paid on these amounts.

      Below I’ve included a link to an ATO checklist on OTE. Although not exhaustive, it does cover most standard types of payments made to employees:
      https://www.ato.gov.au/Business/Super-for-employers/How-much-to-pay/checklist–salary-or-wages-and-ordinary-time-earnings/

      If you need any further information, please don’t hesitate to reply or call our Southport office to speak with me.

  1. Hi Max,

    Thank you for your inquiry below:

    Max
    “Does SGC include the accrued annual leave then? I know the SG only considers the ordinary time earnings.”
    https://www.quillgroup.com.au/blog/have-you-paid-your-superannuation-late/

    That’s is correct, SG is paid only on what is classified as Ordinary Time Earnings (OTE). Annual leave is one of the categories that is considered to be OTE, so is subject to SG.

    If you are required to pay or receive an annual leave loading under an award, the loading amount is not considered OTE so SG is not required to be paid on these amounts.

    Below I’ve included a link to an ATO checklist on OTE. Although not exhaustive, it does cover most standard types of payments made to employees:
    https://www.ato.gov.au/Business/Super-for-employers/How-much-to-pay/checklist–salary-or-wages-and-ordinary-time-earnings/

    If you need any further information, please don’t hesitate to reply or call our Southport office to speak with me.

  2. My employer has not paid super on my behalf for almost 2 years. I have asked her to pay but she is always saying she does not have the money. What happens about the lost of earnings/growth that I have lost due to her not paying?

    1. Hi Susan,

      There is a part of the Superannuation Guarantee Charge that employers are required to pay when the superannuation guarantee payment is late, which compensates for the loss of earnings potential in such a situation. Currently this is calculated at 10% from the beginning of the quarter that each superannuation amount is late for.

      As a note: this amount is interest is calculated on your superannuation amount calculated on your full salary and wage amount including overtime, allowances, etc. This means it is possible that you’ll get a higher superannuation amount than if the payment was made on time, in addition to the 10% interest calculated on this higher amount.

      If you would like any further information, please don’t hesitate to reply or call our Southport office to speak with me.

  3. Hi Daniel,
    Your blog and also the reply to Susan (12/5/17) states the following
    As a note: this amount is interest is calculated on your superannuation amount calculated on your full salary and wage amount including overtime, allowances, etc. This means it is possible that you’ll get a higher superannuation amount than if the payment was made on time, in addition to the 10% interest calculated on this higher amount.
    The ATO who are moving (? – just shy of 6 months since reporting and they haven’t even come out of the blocks; super unpaid from Aug 2016) to recover my unpaid super from a previous employer, have told me that the employer will still only have to pay super on OTE and not the full salary including overtime etc.
    Who is right – them (can’t always expect the ato to know everything about super and tax – lol), or hopefully you?

  4. Hi Daniel,
    Found this in another section of ato website
    Example: Employer pays no SG

    In the quarter from 1 July to 30 September 2009 (when SG was 9%), the employer does not pay any SG contributions. As a result of an employee enquiry about their unpaid super, we audit the employer for the September 2009 quarter. This occurs several years later and is completed on 5 August 2013.

    We calculate the employer’s SGC liability on the full salary and wage amount (not just OTE), and each employee receives nominal interest of 10% on that amount, calculated from the start of the quarter the SG wasn’t paid.
    Guess it is true that the ato call centre staff do not know the rules.
    Kudo’s Daniel.
    Regards Mark Rentsch

    1. As you subsequently found to confirm, the calculation of the Superannuation Guarantee Charge is based off your total salary and wages (inclusive of overtime, etc.) rather than just the ordinary time earnings (OTE). So as your employer has or will be paying your superannuation late you end up with extra due to the 10% interest and a higher base amount.

      And yes, not all ATO staff get the answer right all the time so it is good to double check.

      If you have any further questions please let me know.

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