Employer super issues
The superannuation guarantee charge (SGC)
If the minimum SG contribution is not made by an employer by the cut-off date for one or more quarters, or the employer does not contribute to the employee's chosen fund, the employer will be subject to the superannuation guarantee charge (SGC) and the following penalties apply:
- The charge is not tax deductible, unlike most other employer super contributions.
- Interest at the nominal rate of 10% pa is payable, plus an administration fee.
- The shortfall calculation is based on an employee's salary and wages (not OTE), which may be more than their ordinary time earnings.
- Further penalties for late payment (such as the general interest charge) and failure to provide a SG statement apply and are not tax deductible.
|Proposed superannuation guarantee amnesty
At the time of writing, legislation1 has been introduced to provide a one-off 12 month amnesty to encourage employers to self-correct historical SG noncompliance. The amnesty will be available from 24 May 2018 to 23 May 2019 and applies to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018.
For a disclosure to qualify for the amnesty, it must relate to an amount of SG shortfall that has not previously been disclosed to the ATO, and the ATO must not have, at any time before the disclosure, informed the employer that they are examining, or intend to examine the employer's SG compliance.
Employers who voluntarily disclose these shortfalls in the amnesty period will be required to pay, or enter into and comply with an arrangement to pay, all employee entitlements (SG amounts owed, nominal interest and general interest charge imposed on overdue SG charge).
Where employers self-declare historical SG shortfalls in the amnesty period and make payments of the disclosed SG charge within the amnesty period they:
Where the ATO makes contributions of payments made in the amnesty period to an individual's superannuation account, these will be concessional contributions. To ensure individuals are not subject to excess concessional contributions due to the amnesty, the ATO will use its discretion to reallocate the contributions to another period without requiring a request from the individual. However where an employer makes contributions directly to the employee's superannuation account in the amnesty period, any reallocation of contributions must be requested by the individual. Amendments will also ensure any contributions made in the amnesty period will not attract Div 293 tax or cause other low tax contribution amounts to attract additional Div 293 tax.
At the time of writing this proposal is not law.
1 Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018
Calculating the SGC
The SGC includes:
The sum of an employer's individual SG shortfalls for each employee:
This is based on the individual shortfall percentage, that is the difference between the charge percentage and the actual percentage of support, for each employee. In other words, the difference between the required contribution and the contribution actually made.
Additionally, a penalty for any non-compliance to choice of fund rules will increase an employer's individual SG shortfall. Non-compliance with choice of fund rules includes making the correct amount of SG contributions but directing them to the wrong fund.
The amount of any increase (for non-compliance with choice of fund rules) is subject to a maximum of $500 for a notice period and is calculated as follows:
25% x [notional quarterly shortfall - actual quarterly shortfall]
Where notional quarterly shortfall is effectively the amount contributed to the wrong fund.
An interest component of 10% per annum of the total of an employer's individual SG shortfall. Interest is calculated from the start of the relevant quarter until the SGC is paid to the ATO (inclusive).
A fixed administration fee:
$20 is charged for each employee for whom there is a SG shortfall.
If each employee's salary and wages for a quarter was $10,000 and there are 20 employees, and the employer only pays 6% SG instead of 9.5%, and the employer pays the SGC 137 days after the start of the relevant quarter, the SGC will be:
1. Sum of the individual SG shortfalls = 3.5% x $10,000 x 20 = $7,000
Total SGC = $7,663
Note: The late payment general interest charge may also apply.
Paying the SGC
An employer who is liable to pay the SGC must lodge a SGC statement and pay the SGC to the ATO (not the employee's super fund) by the dates in Column 3 of the table below. Where the SGC is paid after these dates, the general interest charge and other penalties may apply.
|SG quarter 2018-19||Cut-off date for SG contributions1||Due date for lodgement of SGC statement and payment of SGC1|
|1 July - 30 September||28 October||28 November|
|1 October - 31 December||28 January||28 February|
|1 January - 31 March||28 April||28 May|
|1 April - 30 June||28 July||28 August|
1 Where a due date falls on a day that is not a business day (i.e. the due date is a Saturday, Sunday or public holiday) lodgement or payment may be made on the first business day after the due date without incurring a penalty or general interest charge (GIC).
SG obligations for the 1 April to 30 June quarter are not due until 28 July, however, employers need to make the contribution by 30 June to claim a tax deduction for that financial year.
Certain late employer SG contributions (ie those made after the cut-off dates in column two above) may be used to offset the SGC incurred. An employer can make late contributions to offset the SGC by up to four years after the end of the relevant quarter. The employer must still lodge an SGC statement and will still be liable for the administration fee and interest component of the SGC. Where a contribution is used to offset the SGC, it is not tax deductible to the employer.
|Handy ATO super guarantee tools
The ATO has released the following tools and calculators (available at ato.gov.au) that employers can use to help manage their SG obligations, which you may find useful:
Last modified: Tuesday, April 30, 2019