Super Guarantee Late Payments

The ATO and superannuation funds are becoming very talented at detecting late payments of Super now with Single Touch Payroll.

Compulsory superannuation payments are due quarterly, within 28 days after the end of the relevant quarter. So for the quarter ended 30th September, payments need to be with the super fund by the 28th of October.

If you fail to pay the entire quarterly accrual or pay late (even by one day) a shortfall arises. By the time you realise a deficit, you enter the realm of the Superannuation Guarantee Charge (SGC), the consequences of which can be summarised as follows:

  • A nominal interest component accrues on the shortfall for the relevant quarter at 10% from the start of the quarter for which you were late. Interest will keep increasing until you complete the ATO form – late payment does not halt the interest! This nominal interest is then later distributed by the ATO to the employees to compensate them for ‘lost earnings’.
  • A separate form is needed for each quarter in which there was a late payment.
  • A $20 administration fee is also payable per employee, per quarter.
  • The entire SGC amount (that is the super paid late, the nominal interest & the admin charge) is not tax-deductible.

To understand the seriousness of this law, imagine that you have ten employees and you owe them $10,000 in compulsory superannuation for the quarter ended 30 September 2015. You pay in full on the 29th of October 2015 (1 day late). Assume that you are then subjected to an audit in 2017 and eventually complete the required form on 30 June 2017. The first component of the charge will be the shortfall (the amount unpaid by the due date) of $10,000. Then, interest will be calculated from the start of the relevant quarter (1 July 2015) until the date the form is completed (30 June 2017), being a total of two years. Interest is therefore 10% x $10,000 x 2 = $2,000. Lastly, an administration fee of $20 x 10 employees is payable, i.e. $200. A total charge of $12,200 will arise.

What about the $10,000 paid on the 29th October? The amount can either be offset against this charge (although doing so renders the $10,000 paid as non-deductible) or carried forward as an advance payment to a subsequent quarter.

What can employers do to avoid this problem?

  1. Prioritise this payment to ensure you pay on time.
  2. Pay monthly – that way, if something goes wrong, it’s likely to be 1/3 of the value it would have been.
  3. If you are aware you have paid late, come in to see us as soon as possible, and we will assist you with completing the SGC Statement.

The ATO also expects your accountant to reduce the tax deduction claim that is made in your tax return. With STP the ATO now can see every instance of late payment of super and will impose penalties. We must minimise the penalties by not claiming a tax deduction for these late payments. The Super Guarantee Return must also be lodged.