RSM Australia

Superannuation – a due date that cannot be negotiated

To the surprise of many employers, missed, or late, superannuation payments can have significant financial and administrative consequences for the business.  Although you may be experiencing difficulties in meeting your employer superannuation obligations as a result of tighter cash flows, internal administrative errors or processing delays, we recommend that all efforts are taken to ensure your Superannuation Guarantee (“SG’) obligations are met on time.

The quarterly due dates for Superannuation Guarantee payments are listed below:

Quarter Period Due Date*
1 1 July – 30 September 28 October
2 1 October – 31 December 28 January
3 1 January – 31 March 28 April
4 1 April – 30 June 28 July

*or next business day if 28th falls on a weekend or public holiday

Although SG obligations have a quarterly due date, you, as an employer are able to make superannuation contributions on a weekly, fortnightly or monthly basis in-line with employee pay runs.  This strategy reduces the risk of paying SG obligations after the due date, but the concept of ‘paid’ for SG purposes is not as straightforward as it seems.

Paid vs Received

The ATO will not accept that an employer has paid on time unless the employee’s complying superannuation fund has received the contribution on or before the 28th due date.  Payments made to clearing houses (except Approved clearing houses which are very limited) will not be considered as being received by the complying superannuation fund. In addition, clearing house delays will not be accepted as a valid excuse for late payments regardless of whether the employer initially transferred the superannuation contributions to the clearing house prior to the due date.

Missed the SG Due Date – Now What?

If you as an employer do not pay the minimum amount of SG for an employee into the correct fund by the due date, the employer is liable for the Super Guarantee Charge (“SGC”).

The SGC is made up of:

  • SG shortfall amounts (including a choice liability if an employer has not given an eligible employee a choice of super fund), calculated on your employee’s salary or wages;
  • interest on those amounts, currently charged at 10%; and
  • an administration fee of $20 per employee, per quarter.

The fact that SGC is calculated on salary and wages, and not ordinary time earnings, can increase the SGC liability significantly, especially in an industry where overtime payments are common.  In addition to the negative cashflow impact, a tax deduction is not available for the original superannuation payment nor the superannuation guarantee shortfall, interest on the shortfall or the administration charge.

Further, if an employer does not meet their SG obligations, they may also be liable for a range of penalties or charges on top of the SGC, including:

  • Director penalties;
  • General interest charge; or
  • Administrative penalties.

Future Changes

The Government released for public consultation exposure draft legislation titled Superannuation Guarantee Legislation Amendment (Simplification) Bill 2015 which proposes to simplify and reduce the harshness of the SGC regime by:

  • aligning the earnings base for calculating the SGC (currently salary and wages) with the base used to calculate superannuation guarantee contributions (ordinary times earnings);
  • aligning the nominal interest on unpaid or late SG contributions with the period over which the contributions are outstanding; and
  • removing the additional SG charge penalty and replacing this with the general tax penalty provisions imposed under the Tax Administration Act 1953.

Recommendations

Our experience has shown that where an employer has a quarterly liability and has significant overtime the cost to the company of paying late by one day are substantial.  This does not take into account the additional administrative burden required to rectify the payment.  We would strongly recommend that you review how superannuation contributions are calculated, are you paying superannuation contributions for all eligible employees and when funds have been received by the complying superannuation funds.  If you have any questions please contact your nearest office to discuss the matter. 


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