At MJJ we have seen a huge increase in the number of businesses not paying Employee Super on time, often due to the superannuation clearing house taking days or even a week to clear payments. It is important to understand a payment is considered ‘paid’ when it clears with a superannuation clearing house and reaches the Super Fund, not the date it leaves your bank account.
When the payment is late you are then required to complete and submit a Superannuation Guarantee Charge Statement which includes a mountain of penalties from the Australian Taxation Office (ATO) that is why MJJ have created an informative and easy to follow guide.
Due dates for superannuation
- It is highly recommended to familiarise yourself with the Superannuation due dates in this fact sheet; to make calendar reminders so you do not miss these deadlines.
What should you know about Superannuation?
- When does the ATO consider Super paid?
The ATO only deems Super paid when it is cleared to the employees super fund not when payment has been processed in your clearing house. It can take up to 10 business days from the clearing house to reach its destination so by paying super early this will alleviate to risk of potential late payments.
- Single Touch Payroll (STP) give the ATO real time data as to when super is paid – making the ATO extremely insightful as to when businesses’ have missed these deadlines.
- The ATO are very strict when it comes to superannuation, no matter how little your late super is, the penalties still apply.
What to do when Super is paid late & how does the SGC form work?
- First things first do not panic!
- You will need to complete a Super Guarantee Charge form which can be found here, it is recommended to use the latest version of these forms via the ATO website as when it comes to lodging these the ATO may reject if the most up to date form is not used.
https://www.ato.gov.au/forms-and-instructions/super-guarantee-charge-sgc-statement
- What is involved in the SGC form, how is it calculated (interest and penalties)?
- You need to calculate the SG Shortfall which is the total Superannuation payable per employee for each quarter based on ordinary hours. However, to note when completing the SGC form, you will also need to include Super on any overtime hours, this is a penalty for not paying the Super on time, normally Super is exempt from overtime but it is included in the SGC form calculator.
- There is also a section to add late payment offsets. So, the calculator would minus the late payments from the SG Shortfall amount giving the net amount of Superannuation payable. But there are added fees such as nominal interest at 10% and administrative costs associated. Interest is calculated daily, and administrative fees are $20 per each employee included in the SG Shortfall form.
- There is a guide from the ATO on how to complete the form which can be found here https://www.ato.gov.au/forms-and-instructions/guide-to-completing-the-super-guarantee-charge-statement
Let’s illustrate this with a case study
If paid on time
For example, Sarah has an independent cat grooming business, run via a company structure, with 15 employees, their Q1 – 1 July 2024 until 30 September 2024 is due on 28 October and the Superannuation Guarantee Payable totals $25,000.
As the super is paid on time, $25,000 is 100% deductible.
As Sarah’s company receives a tax deduction and saves 25% income tax liability on the $25,000 super payment, the true out of pocket cost for the company now comes back to only $18,750.
If paid late
Step 1 – calculating the SG shortfall
Using the same business case as above with a total Superannuation Guarantee (SG) Payable of $25,000. However, in Q1 some employees completed overtime, now the business is liable to pay Super on this (normally exempt) so including the Super payable on overtime the company now must pay $30,000 for the SG Shortfall.
As the Super is paid late, you are denied a tax deduction. On $30,000 at the company tax rate of 25%, that is $7,500 more tax you pay because you have not paid Super on time.
Step 2 – Calculating the nominal interest
Sarah lodges her Q1 SGC statement on 20 November, she is required to send the SGC statement to the ATO by 28 November, she then counts the number of days between 1 July 2024 and 28 November, which is the later of the 2 dates for the relevant quarter. This is 150 days.
She calculates her nominal interest as:
- Super guarantee shortfall divided by the number of days in the year × number of days from the start of the quarter until the lodgement day × 10%
- Super guarantee shortfall × 150 days ÷ 365 days (1 year) × 10%
=$30,000 x 150 days ÷ 365 x 10%
= $1,232.87
Step 3 – calculating the administration fee
Sarah calculates her administration fee for Q1.
Number of employees for whom there was a shortfall × $20
= 15 employees x $20
= $300
Step 4 – calculating the SGC
Super guarantee shortfall + nominal interest + administration fee
= $30,000 + $1,232.87 + $300
= $31,532.87
Sarah is not able to claim a tax deduction for this amount, therefore she is out of pocket the full $31,532.87. When you compare this to the on time payment which costs only $18,750.00 in out of pocket expense it is a vastly different outcome.
Below is another example of a case study from the ATO calculating the SGC.
Strategies to minimise the risk of SGC
- Ensure timely payment and process of Superannuation, by processing Super monthly rather than quarterly it can minimise the risk of missed or late payments.
- Review your clearing house/ payroll software making sure it is processing the calculations on time, we have witnessed clients Xero account process Super a month late, by not having the correct deadline settings in place.
- Making sure employee superannuation details are current, promptly addressing any bounced payments, and tracking and resolving them without delay.
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