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ATO Crackdown on Superannuation Guarantee

Written by Luke Bland . December 01, 2020
4 min read

The amnesty on unpaid superannuation guarantee has now ended, and the ATO have indicated they will be reviewing their records for evidence of unpaid, underpaid or late paid superannuation guarantee payments. They have also issued a practice statement regarding penalties.

The Basics of Superannuation Guarantee

Employers in Australia generally have an obligation to make superannuation guarantee payments on behalf of their employees at a rate of at least 9.5% of the employee’s ordinary time earnings.

Superannuation guarantee payments are due to be made on a quarterly basis, 28 days after quarter end. The due dates are as follows:

  • Quarter ended 31 March – due 28 April
  • Quarter ended 30 June – due 28 July
  • Quarter ended 30 September – due 28 October
  • Quarter ended 31 December – due 28 January

 An employer’s superannuation guarantee obligation is subject to the maximum contributions base i.e. if an employee’s salary exceeds $57,090 per quarter, the employer is only obligated to pay superannuation guarantee based on 9.5% of that amount.

Making Superannuation Payments

Payments made to an employee’s superfund on their behalf must be made via a clearing house. The only exception to this is when an employer makes a payment to a related party’s Self-Managed Superannuation Fund (SMSF).

There are clearing houses built into some cloud based payroll systems, or most retail and industry funds offer free or low cost clearing houses. The ATO offers a free clearing house for small businesses.

Once set up, making superannuation payments via a clearing house is easy – you make one payment to one clearing house, and they distribute this payment across the superannuation funds of each of your employees. Payments must be made electronically, and are reported via an Electronic Service Address.

The cloud-based superannuation system, coupled with the cloud-based Single Touch Payroll (STP) system, means the ATO now has unprecedented access to information regarding businesses’ payroll and superannuation obligations.

Care must be taken to ensure that your payment obligations are met to avoid penalties being imposed.

Penalties

If you do not meet your payment obligations for one or more quarters, the ATO will issue you with a Superannuation Guarantee Charge (SGC) payable for the relevant quarters.

  • This SGC will be based on:
    1. 9.5% of the gross wages reported for the quarter (not limited to Ordinary Times Earnings)
    2. Plus interest charged at 10%
    3. Plus an administration fee of $20 per employee

The ATO have stated that they will likely apply a Part 7 penalty of 100% of the SGC amount and may apply a penalty of up to 200% of the SGC calculation in certain cases. Further to this, SCG payments are NOT tax deductible.

You will receive a credit for any superannuation paid prior to the due date, and a can claim a further credit for superannuation paid late. However the late payment credit is applied after the interest and penalties have been applied on the SGC. The late payment is also not tax deductible.

Example

Say your company has 5 employees earning $50,000 each. Their combined quarterly superannuation guarantee amount is $5,937.50. If you pay this on time, your out of pocket cost is:

  • Super paid $5,937.50
  • Less tax saving ($1,632.80)
  • Net after tax cost $4,304.70

If paid one month late, the SGC would be approximately:

  • Base SGC $5,937.50
  • Interest $49.50
  • Administrative charges $100.00
  • No tax saving
  • Net after tax cost $6,087.00

As a result of simply paying the liability one month late, you would be out of pocket $1,782.30, which equates to an additional 41% of the original liability. This excludes any other penalties that may be imposed.

This demonstrates the severity of the penalties for late payments, underpayment or non-payments of superannuation guarantee for your employees, and reiterates the importance of paying superannuation obligations on time and in full.

To clarify details around superannuation guarantee for your business, our team at BLG Business Advisers are here to assist you, so please talk with us today.

*This information is correct at the time of publishing and is subject to change.*
Written by Luke Bland . December 01, 2020
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