ATO Crackdown on Superannuation Compliance for Small Business

The ATO has recently increased its efforts in order to address Superannuation Guarantee (SG) non-compliance.  This current age of data matching through STP has led to a rise in SG reviews in order to identify discrepancies in super payments, and to ensure employers meet their compliance obligations so employees receive their correct entitlements.

Quarterly super payment due date

From 1 July 2023, the SG rate increased from 10.5% to 11%, and for most employers, they must be paid in full by the quarterly due dates as detailed below:

It is important to note that superannuation contributions paid by employers are only tax deductible if they have been paid by the due date.  If you use a clearing house, the super contribution is only counted as being paid on the date the fund receives it, and not the date the payment comes out of your bank account or the date the clearing house receives it from you.  If the payment due date falls on a weekend or public holiday the amount must be received by the fund on or before the next business day.

What happens if you pay late?

When payments are not made by the due date, the employer needs to lodge a superannuation guarantee charge (SGC) statement and pay the outstanding amount and related fees directly to the ATO. The easiest option to calculate these payments is to use the SGC statement available on the ATO website: HERE

Who is likely to receive an ATO Audit?

From 1 July 2019 STP was introduced which required employers to report salary and wages, PAYGW and super payments in real time directly to the ATO.  This means the ATO now has access to significantly more data to identify employers who are not meeting their SG obligations.  The ATO regularly conducts audits on SG obligations and become aware of offences by using the data matching activities or by receiving complaints from employees.

Harsh Penalties for Non-Compliance

Under the director penalty regime, the ATO has the power to recover unpaid SG from Directors personally through measures such as garnishees, legal recovery proceedings and reduction of tax credits in a Director’s personal tax return.   If employers are repeatedly caught and still fail to pay SG liabilities the ATO also has the ability to seek court ordered penalties.

If you are expecting a reprieve from the ATO for a first-time offence you need to think again.  Non-compliance of SG obligations can lead to penalties of up to 200% of the original amount, plus interest of 10% per annum and administration fees.  The SG payment obligation and applicable late penalties are also no longer a deductible expense for the business.   The Commissioner does not have any legal discretion to remit the SGC itself, but there have been cases where some of the penalties have been reduced.

The key to addressing late super payments or an ATO SG audit is to initiate reviews yourself or respond to notices in a timely matter.  The ATO have advised they will be more compassionate and work with the clients in relation to payment plans or penalties should this occur.

If you are an employer now is a good time to review your SG obligations before the ATO can initiate an audit, especially if you want to avoid the potential costly double liability and denied super deductions.

If you require any assistance or advice regarding your superannuation guarantee compliance obligations, please call the team at MJJ Accounting and Business Solutions on 07 5451 1118