We are seeing increasing instances of ATO action in relation to late payment of Employee Superannuation. The below explains the importance of quarterly superannuation guarantee (SG) obligations being paid on time, and the punitive costs imposed by the Australian Taxation Office (ATO), even if the payment is just one day late.
By way of background, employers are required to pay their employees superannuation (currently 11%), by the 28th day of the end of each quarter. If the payment is made late the employer is required to self-report to the ATO via an SGC Statement, with the following additional payments required:
Administration fee: An additional $20 fee is charged per employee.
Nominal interest component: 10 percent interest is charged on the superannuation amount from the beginning of the quarter until the SGC statement is lodged. It is important to note that payment of the superannuation does not stop interest from accruing, lodgement of the SGC statement does.
Shortfall amount: If the superannuation is paid late, there may be an additional amount to be paid as on lodgement of the SGC form the superannuation is calculated based on employees’ salary and wages, not their ordinary time earnings (OTE).
The example below shows the potential impact of paying the SGC late:
An employer with 10 employees had a super liability of $9,500 for the March 2020 quarter, based on wages paid of $100,000.
The employer paid the super of $9,500 in full on 29 April 2020, just one day late. The employer does not report an SGC statement to the ATO.
3 years later, in March 2023, the employer is subject to an ATO audit, and submits SGC forms to the ATO, so the following amounts become due:
Administration fee: $200 ($20 x 10 employees),
Nominal interest component: $2,850 ($9,500 x 10% x 3 years)
Shortfall amount: Nil as super was paid so Late Payment Offset can be claimed.
An additional amount payable of $3,050 despite the superannuation being paid only one day late. There is no discretion for the Commissioner to reduce the amount of SGC irrespective of the circumstances.
Additional implications include:
The entire SGC amount (shortfall, interest, and administration charge) not being tax-deductible,
Accrual of general interest charges on the SGC until it is paid,
Other penalties, such as fines for failing to provide an SGC statement when required. The maximum penalty for this is 200 percent of the SGC payable.
Directors of a company can become personally liable for penalties equal to the unpaid amount if the SGC liability is not met in full by the due date.
Additionally, the government has recently introduced draft legislation for criminal penalties, including up to 12 months in jail for employers (including company directors) who fail to comply with a direction to pay outstanding superannuation guarantee.
To avoid these consequences, we recommend taking timely action and meeting employee superannuation obligations promptly.
With the advent of STP reporting, and enhanced data sharing with superannuation fund, the ATO receives up to date information to detect late superannuation payments As such it is crucial to rectify any non-compliance as soon as possible.
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