Being late with your superannuation guarantee payments will cost you
Employers be warned. If you are late in making superannuation payments for your employees the consequences can be far ranging, from missing out on eligible tax deductions to Company Directors potentially being held personally liable for any unpaid Super Guarantee Charges (SGC).
Recent research by Industry Super Australia and Cbus says the annual shortfall created by employers not fulfilling their obligations towards payment of superannuation for their employees is in the billions of dollars. While the Australian Tax Office (ATO) and the Australian Bureau of Statistics suggests a more conservative amount, the ATO confirms that “it takes any case of non-payment seriously and that it investigates around 20,000 cases a year”. Also, it has been reported that “the Federal Opposition has referred the impact of non-payment of the Superannuation Guarantee to the Senate Standing Committees on Economics for inquiry”.
As most employers know, in general the rules are that employers must pay superannuation at 9.5% rate of ordinary times earnings for most employees and some contractors over 18 years of age who earn over $450 a month. These payments must comply with SuperStream requirements and in most cases must be made electronically to complying funds each quarter, no later than 28 days after the end of the relevant quarter.
What employers may not realise is that the potential consequences for missing superannuation payments are far ranging and can include:
• Paying 9.5% superannuation on all wages, not just ordinary earnings. If payment is late, under the SGC shortfall the 9.5% superannuation payment reverts to being payable on all wages, not just those governed by the super guarantee rules.
• Loss of tax deductions on late contribution payments. Tax deductions for superannuation contributions are available only for actual payments made and not for amounts due. To be eligible to claim a deduction the payments must be made on time. If a payment is made after a due date, be it a day late or much longer, a tax deduction is denied.
• Additional costs to pay which are not tax deductible. In most cases, a SCG statement is required to be lodged for missed payments and a charge paid, on many occasions, directly to the ATO together with extra interest and administration fees. None of which are tax deductible. Missing a superannuation payment will also cost you time as well as money as completing the SGC statement can be very time consuming.
• Bypassing the SGC may result in having to pay the superannuation again. If employers pay employees superannuation late and directly into the relevant superannuation funds without completing SGC statements and electing to apply the amounts paid against the SGC could result in the business having to pay the superannuation again.
• Directors of companies can also be personally liable for any unpaid SGC. This can also include unpaid PAYG withholding tax.
If you do have to pay the SGC, there may be some relief depending on your situation. These can include using the late payment offset to reduce the amount of SGC payable or carry the late payment forward as a prepayment of a future superannuation contribution.
In the long run through, it is just not worth losing a tax deduction, spending extra effort on administration, running the risk of having to pay the contributions twice or Directors being personally liable by not paying correct superannuation amounts on time.
If you have any queries or would like more information on this or any other superannuation topics, please contact our Tax and Business Advisory Division on 08 9225 5355