With the ATO now holding first-hand data readily available from both the Single Touch Payroll (STP) system–which became compulsory on 1 July 2021 for ALL businesses–and SuperSteam, your super guarantee obligations are under stricter scrutiny than ever. If you miss a due date, they will know.

Your past experience probably tells you this: “We have been paying super late quite often. Nothing has ever happened to us.” But not anymore. Law changes. Further, with the aid of fast-advancing technology, catching wrongdoings will just get easier and easier. In case you are not aware yet, ATO has been sending out audit letters to employers for reviewing their superannuation employer obligations. And when the stress from the whole COVID business is finally lifted, we expect to see more of such letters coming. So it’s better to get your old mindset switched over earlier than late–if you don’t want to face the consequences of late payments.

So, what are the consequences?

Implication 1: the super guarantee charge (SGC) obligation

As you’ve already known, employers must pay a minimum super guarantee (currently 10%) on employees’ ordinary time earnings, on a quarterly basis. The nominal due dates are:

Quarter Super guarantee payment due date
1 July – 30 September 28 October
1 October – 31 December 28 January
1 January – 31 March 28 April
1 April – 30 June 28 July

As soon as a super guarantee payment is late–even if by just one day, super guarantee (SG) becomes super guarantee charge (SGC), and you must prepare and lodge an SGC statement to ATO by below due dates:

Quarter Super guarantee payment due date Super guarantee charge and statement due date
1 July – 30 September 28 October 28 November
1 October – 31 December 28 January 28 February
1 January – 31 March 28 April 28 May
1 April – 30 June 28 July 28 August

By all means, you would want to avoid lodging an SGC statement because the process is tedious and costly:

  • normally employers are only liable for super guarantee (SG) on ordinary time earnings (OTE), not on non-OTEs such as overtime; but once SG becomes SGC, you are also liable for super on non-OTEs.
  • ATO will charge $20 administration fee per employee per quarter. So if you have 50 employees, that’s $1,000 out.
  • you will incur extra accountant costs for preparing and lodging the SGC statement.
  • nominal interest per annum (currently 10%) which accrues from the start day of the relevant quarter until the later of the relevant SGC statement due date and actual SGC lodgement date). This nominal interest charge is NOT TAX DEDUCTIBLE.

The method of accruing interests is rather harsh. It’s not what you think it would be. Below two examples will help you understand it well.

Example 1: lodge and pay SGC before SGC due date

As you can see from the above, even if the SGC statement is lodged before its due date, the interest is still calculated for the period from 1 July 2021– the first day of the quarter– up until 28 November, the SGC due date.

Example 2: lodge and pay SGC after SGC due date

When your SGC statement is lodged late (after the due date), the interest is accrued from 1st day of the quarter until the date you actually lodge the SGC. In the above example, even though you’ve already paid the normal SG on 20 Nov 2021, the nominal interest is accrued on the whole amount from 1 Jul 2021 all the way to 6 Jan 2022 when you actually lodge the SGC. In this case, you end up paying half year interest on the late payments for the quarter, which could be quite substantial. Let’s say, the late amount is $30,000, the 10% interest for the period from 1 Jul 2020 to 6 Jan 2022 would be $$1,562.

Implication 2: tax deduction no longer allowed

Any late or missed super guarantee payments plus any nominal interests charged on SGC statements are NOT tax-deductible. Yes, it IS that radical. For example, if you are a small business run through a company structure, you effectively lose 25% of the value of the late super amount plus its nominal interests charge. Say the late super payment is $30,000 and interest $1,562, your lost amount in tax would be $7,891.

What if I don’t lodge an SGC statement?

Pretending everything is fine may save you money and trouble for now, it will cause you future headaches at expensive costs when ATO finds out and send you notices. There are two reasons why you should lodge an SGC statement on time if you pay super late.

1. Penalties

You’re liable for a penalty by law if you:

  • lodge your SGC statement late, or
  • fail to provide a statement or information when requested during an audit.

The maximum penalty is 200% of the SGC, that is, the whole late super amount plus any interest charges.

2. Snowballed interest charges

The 10% nominal interest could become a substantial amount as it accrues until you actually lodge the SGC statement, even if you’ve paid the late amount at a much earlier date. For example, you’ve paid one quarter’s super payments a few days late and didn’t bother to lodge an SGC statement. Two years later ATO conducts an audit and finds out the late payment and an SGC is never lodged. You will have to lodge the required SGC then, which means the interest accrual period will be over two years long! And there will be penalties on top…

Any leniency on penalties and interests?

The short answer is NO.

The tax commissioner (ATO) has no discretion to reduce the nominal interest, administration charge or allow tax deduction on any late super payments. It’s not a negotiable business because the legislation is really trying to protect employees’ super entitlements without any concessions. Remember, paying super on time is just as important as paying wages.

Due dates and possible delays

While ATO has clearly set out the due dates for each quarter, it should be noted that these dates are just nominal dates. ATO strictly requires that all super payments must arrive at the super fund by the due date, rather than being simply paid or processed by that date. Depending on which accounting software or clearing-house you use, the processing could take five up to ten business days. For example, if you pay super via MYOB (their processing time is usually five business days), for the December 2021 quarter super (due 28th Jan 2022), you should process and pay it on or before 21th Jan to avoid any delays. Remember, if payments arrive in the fund later than the due date, they are no longer tax-deductible and will be subject to an SGC statement.

Tip: software such as MYOB normally requires you to set a $ limit on how much super you can pay monthly/quarterly, make sure you increase the limit in time to reflect rises in wages as a last-minute change might be subject to some further limitations. eg. MYOB doesn’t allow more than a $15,000 increase within the last 90 days. So don’t wait until the payment day.

Advice from us

By all means, pay super on time and make sure the payments are received by the fund by the due date.

If, in any case, the above fails, lodge and pay an SGC statement as soon as possible to avoid further penalties and interests.

 

Need help on super compliance or SGC statements? Contact us today.

 


Disclaimer:
Please note that this article is intended to be a general guide only, and should not be seen to constitute legal or tax advice. Where necessary, you should seek a second professional opinion for any legal or tax issues raised in your personal or business tax affairs.

 

Emma Zhao

Emma Zhao

Chartered Accountant | Registered Tax Agent | SMSF Speacialist™ emma@sencilloaccounts.com.au