The importance of paying employee superannuation on time

By Chris Blomquist - Client Manager

At the end of each quarter many small businesses face a number of bills including quarterly Business Activity Statements and employee superannuation obligations. 

Unfortunately, employee superannuation is sometimes forgotten about. It is important to be aware that to ensure your employees receive their agreed superannuation on time, the ATO imposes heavy penalties if superannuation guarantee (SG) is not paid on time. 

SG is due on a quarterly basis and is due by the 28th day following the end of each quarter. Importantly, remember that any concessional lodgment dates for Business Activity Statements (such as the general extension for the due date of quarterly December BASs to the 28th of February) do not apply to superannuation obligations. The December quarter super is always due on the 28th of January. 

What are the consequences of not paying employee superannuation guarantee on time?

First, it’s important to note that penalties apply whether SG is paid one day late or six months late. This means that even if you are one day late, there can be significant administrative and financial consequences. 

If employee superannuation is not paid by the due date, the employer becomes liable for the superannuation guarantee charge (SGC). The SGC consists of: 

• the amount of the superannuation guarantee shortfall on your employee’s salary and wages; plus 
• interest on the late amounts; plus 
• an administration fee that is currently $20 per employee, per quarter. 

However, this does not tell the whole story. Most significantly, the SGC is not tax deductible. 

For example, say you have $10,000 of employee SG payments due for the quarter and your marginal income tax rate is 30%. SG payments are normally tax deductible, so this would reduce your overall income tax liability for the year by $3,000 ($10,000 x 30%). 

But if you are just one day late with your SG payment, you are now liable for the superannuation guarantee charge. The $10,000 is no longer tax-deductible, and you no longer receive the $3,000 income tax benefit. In addition, you need to lodge the required SGC forms, and pay interest and administration fees. 

The proposed superannuation guarantee amnesty

If you are already behind on super for any period from 1 July 1992 to 31 March 2018, it is proposed to introduce a one-off Amnesty. During the period 24 May 2018 to 24 May 2019, employers would be able to self-correct past SG non-compliance without penalty. 

It is important to note that the Amnesty is currently a proposed measure and that its introduction is subject to the passage of legislation. Also, the proposed Amnesty does not apply to any period after 31 March 2018. 

If you would like further information about the Amnesty or ensuring you meet your employee superannuation obligations, please do not hesitate to contact us.

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