Superannuation Guarantee Contributions – Some facts to consider Written by Drew Streitberg
At EASE Business Services, we often receive enquiries from clients regarding employer obligations relating to employee superannuation guarantee contributions (“SG”) and there seems to be an overall continued confusion surrounding this area.
Let’s clear it up!
Basically, the SG is money an employer pays to employee’s’ nominated superannuation funds to provide for their retirement. SG is an expense to a business and it currently sits at 9.5% of an employee’s ordinary time earnings. You must pay the SG quarterly and this came about because of a general lack of compliance by employers. Legislation amendments to this effect were introduced from 1 July 2003. So, even though the requirement to pay quarterly is not new, one of the most common questions I receive is;
“When do I have to pay superannuation for my employees?”.
Here are the key dates below:
It’s important to note that the money due must be in the appropriate Superannuation fund by the due date. You would think that in today’s world of e-commerce that a payment would be instantaneous, however, although the money certainly comes out of your account straight away, the reality is, t often takes a few days to transfer into the superannuation account and I recommend paying the amount before the 28th to ensure compliance.
So, what happens if you miss a deadline?
Depending upon how late you are there are possibly more than one consequences of a missed deadline.
The immediate implication is a loss of tax deductibility.
Superannuation is only considered a tax deduction when it is physically paid and not when it is accrued so often employers believe they are accruing an expense in their profit and loss statements without realising that unless they hit the payment deadlines noted above, the deductions are added back for tax purposes, giving them a higher taxable income and consequently higher taxes to pay!
This can have unforeseen, negative cash flow consequences on a business as a direct result of not properly understanding an employer’s obligations.
However, employers should be aware that continued outstanding SG amounts have particularly nasty penalties lurking in the shadows and these are:
– Super guarantee charge (“SGC”) made up of:
– Shortfall amounts (unpaid amounts)
– Interest on those amounts (10%)
– Administration fees ($20 per employee, per quarter)
There are a few points to consider here:
– SGC Interest is nondeductible for tax purposes;
– Interest is calculated compounding daily; and
– Statements must be lodged with the ATO by certain dates for each quarter
Consider a company with 50 employees where it missed a due date for superannuation for 3 consecutive periods and from an administrative point of view that business is now staring down 150 SGC statements that need to be lodged with the ATO, not to mention the tax implications, potential penalties and administrative costs to a business.
They key dates for lodgement of SGC Statements are:
Failing to lodge the statements by the maximum due dates with the ATO may result in:
– Director penalties o Maximum penalty of 200% of the base charge payable for non-compliance
– Administrative Penalties o Maximum penalty of 75% of the shortfall of SGC payments due to a false or misleading statement
– Garnishee notices
Remember, Directors are personally liable for any unpaid SGC to an employee by the due date!
SGC Statements must be lodged with the ATO, if you are late with SG payments and employers have a maximum deadline of 3 months post the initial lodgement deadline of SGC statements before a Director becomes personally liable.
The only way a Director can avoid personal liability is for a company to pay the SGC. Voluntary administration/liquidation will not remove the liability.
I’m not into scaremongering, but I feel it is extremely important for employers to be aware of their obligations and refresh their knowledge periodically to not only ensure compliance but be aware of the risks a Director faces for non-compliance.
If you are late or fear a payment may be late, there are things that can be potentially done to mitigate certain risks.
If you are still unclear of your obligations or wish to discuss any aspect of the superannuation guarantee, please contact our firm.