This is a reminder that employers need to pay their super guarantee obligations on time. Otherwise, they could be up for significant penalties. Super guarantee contributions must be made to a complying super fund. Also, retirement savings account within 28 days after the end of the quarter in which the liability arose. See the below table for outlines of key dates. It is important to note that some superannuation funds require monthly contributions.
|1||1st July – 30th September||28th October|
|2||1st October – 31st December||28th January|
|3||1st January – 31st March||28th April|
|4||1st April – 30th June||28th July|
Employers who fail to pay the super guarantee contributions by the due date are required to lodge a Super Guarantee Charge Statement. And pay the Super Guarantee Charge (which is not tax-deductible). This obligation remains even if all the super guarantee contributions were made only a couple of days late.
The penalties for late payment of super guarantee contributions are quite severe and should be avoided at all costs. There are essentially three aspects to the Super Guarantee Charge:
- The calculation of the super guarantee shortfall amount
- How interest is calculated on those amounts
- The administration fee of $20 per employee per quarter
Normally the super guarantee contributions are calculated on the employees’ Ordinary Times Earnings (i.e., excluding overtime). However when their super guarantee contributions are paid late there is a recalculation of the super guarantee contribution amount. Super is now payable on the employee’s total earnings (i.e., inclusive of overtime). This could result in a significant amount of additional super payable if the employees have been working overtime.
Under the current Super Guarantee system, interest accrues (currently at 10%) on the super guarantee shortfall amount from the start of the quarter that the super guarantee was not paid on time through to the date that the Super Guarantee Charge Statement is lodged, and the Super Guarantee Charge is paid. This is probably the most brutal of the penalties for late payment of an employee’s super guarantee contributions:
- Interest is calculated from the start of the quarter that the super guarantee contributions were not paid on time and as such an employer could end up paying interest for a period prior to a liability arising. For example, if an employee commenced with a business on 15 June 2020 and their super guarantee contributions were paid late, interest would be calculated from 1 April 2020, some two and a half months prior to them commencing employment. The anomaly does not just apply to new employees but could also apply to employees earning less than $450 in the first two months of the quarter (i.e., where there is no requirement for super guarantee contributions to be made).
This is like paying the bank interest on a mortgage prior to taking out the loan.
- Interest is calculated up until the time that the Super Guarantee Charge Statement is lodged. And the Super Guarantee Charge paid, and as such interest will still accrue. Even where the employee super guarantee contributions have been paid, albeit late. For example, if an employer pays the super guarantee contributions for the June quarter on 30 July (2 days late), interest will accrue from 1 April through until the date that the employer lodges the Super Guarantee Charge Statement and pays the Super Guarantee Charge, which in some instances could be years later.
Using our home loan analogy this would be like paying interest to the bank after you repay your loan.
The administration fee of $20 per employee per quarter may not sound like much, however if you pay 30 employees late, even by 1 day, the administration fee becomes $600. This is intensified if you are late for several quarters.
Late Lodgement Penalties
As if the above penalties are not enough to get employers to pay their super guarantee contributions on time, there are penalties if the employer fails to lodge a Super Guarantee Statement within the required time frame. The Tax Office can impose penalties of up to 200% of the Super Guarantee Charge payable for late lodgement of the Super Guarantee Statement.
Denial of Tax Deduction
Any Super Guarantee Charge payments are not deductible to the employer. As the late paid super guarantee contributions form part of the Super Guarantee Charge the contributions themselves would be non-deductible to the employer in addition to the penalties imposed. Paying the super guarantee contributions one day late could mean that an employer is not entitled to a tax deduction for those contributions.
Directors Personally Liable
Directors of a company that fails to meet a Super Guarantee Charge liability in full by the due date cannot hide behind the corporate veil and can become personally liable for a penalty equal to the unpaid liability.
Getting Caught Paying Late
Superannuation funds now report to the Tax Office when they receive super guarantee contributions for employees (including working owners). The Tax Office is using this information, as well as the information reported through the Single Touch Payroll system, to identify employees who have paid some or all their super contributions late or have not paid the right amount by the due dates. With this data, matching it is only a matter of when an employer will be caught, not if.
We are already receiving letters from the Tax Office advising that they have identified employers who may have a Super Guarantee Charge obligation, so it is essential that employers pay their super guarantee obligations on time.
If you need help in ensuring that all Superannuation Payments are made on time and to the right accounts, do not hesitate in getting in contact with the Accountants at R T Accounting & Taxation Services, who will be more than happy to assist you in all your Superannuation needs.