How much it’ll cost you if you’ve missed, or are late, on paying your employees’ superannuation

Most businesses focus a considerable amount of time and money on customer service. Because satisfied customers drive growth. So if customer service is something that’s usually at the front of a business owner’s mind, why is employee satisfaction sometimes more of an afterthought?

Employees are the lifeblood of any business. They’re critical to everything you do. So it only makes sense to make their satisfaction as big a priority as your customers’.

After all, treat employees like they matter – and they’ll treat your customers like they matter.

Even smaller businesses are jumping on board the employee satisfaction train. Payroll software have taken a lot of the expense, and so many exhaustive man-hours, out of ensuring employees are paid accurately. And on time.

But there’s more to keeping employees from feeling undervalued and overburdened than just paying wages on time. There’s the matter of making timely superannuation payments into their relevant funds to consider as well.

Because not  meeting Super Guarantee (SG) deadlines can mean more trouble for your business than just a bunch of grumpy workers. It can be the kind of unfortunate oversight that ends up costing a business more than they’d ever imagine in both financial and reputational aspects.

Your Business’ Reputation

People talk. And what with Facebook and Twitter now giving everyone a pulpit whence to preach from, word of mouth and online sentiment can play judge and jury to a business overnight – whether there’s been a fair trial or not.

Missing or making late SG payments can be interpreted as a sign that your business might be struggling or unsustainable. Employees view superannuation as part of their overall remuneration package. And rightfully so.

It may be money they won’t be able to access for years, but that doesn’t stop employees from keeping a close eye on super contributions. In short, late or missing SG payments mean a loss of investment earnings for employees.

And that’s a definite red flag. It puts you at risk of losing employee trust and loyalty. And bad as that is, it’s just the beginning of what a business that’s missing or making late SG payments needs to be worried about.

Because company directors can also be held personally liable for unpaid SG contributions. And subject to a penalty equal to the unpaid amount in some cases.

When Are SG Payments Due?

Australian Superannuation Guarantee legislation requires that employers make SG payments four times annually, at the end of each quarter. Employers have 28 days following the end of each quarter for payments to be received, as per Australian Taxation Office (ATO) SG requirements:

28 July
28 October
28 January
28 April

What Happens If I Miss or Make Late SG Payments

For many years, the ATO actually did very little to audit or put pressure on businesses that stuttered or were slow to make timely and regular SG payments. But those days are long gone.

From 1 July 2018 the ATO introduced Single Touch Payroll (STP) for employers with more than 20 employees.  From 1 July 2019, STP will be rolled out to all employees. STP provides the ATO with real time information about superannuation owed to employees upon the completion of each pay run.  The ATO will then data match this information with the daily reports it receives from superannuation funds showing contributions received to identify employers who are not meeting their SG liabilities.  There will be no way to hide from SG shortfalls or late payments once these systems have been implemented!

So what is the impact if I am late or don’t pay my employees super? For starters, you’re likely to end up paying much more money in total.

SG payments are ordinarily calculated as a percentage of an employee’s Ordinary Times Earnings. A figure that doesn’t include things like overtime and other allowances.

But if you’re late to pay – that all changes. Instead of making super payments based on 9.5 percent of the Ordinary Times Earnings, you’ll be paying based on 9.5 percent of all salaries, wages, overtime and allowances. And the difference can be staggering.  

Unlike on-time payments, late payments are not tax deductible. So if you’re so much as one day late with meeting SG payment deadlines, you forfeit any eligibility to   claim deductions on those overdue contributions.

If you’re late making SG payment deadlines, you’ll have to pay interest on the unpaid amount. Interest is calculated from the start of the quarter.  You will also be required to pay an administration charge of $20 per employee, per quarter.

Example:
Small Employer Pty Ltd does not pay superannuation for the quarter ended 31 March 2015.  The ATO receives a complaint from an employee and sends the employer a letter, requesting them to prove they paid the superannuation for all their employees or provide copies of the superannuation guarantee (SG) forms for the quarter. The outstanding superannuation for the quarter ended 31 March 2015, for 6 employees is $4,500.

Super Owing:                 $4,500.00
Interest                           $1,481.90 (for the period 1/1/15 to the date the SG forms are lodged)
Admin Fee                      $120.00 ($20 per employee, per quarter)
Total Cost                       $6,101.90

There is no tax deduction for superannuation guarantee charge (i.e. the late superannuation payment, interest or administration fees).

Compare this to an employer who paid their superannuation on time – the total cost to the employer would be:

Super                             $4,500.00
Less: Tax Saving            ($1,350.00)
Total Cost                       $3,150.00

Total extra cost to the late paying employer is $2,951.90

If this same employer had been late OR failed to make a payment in multiple quarters, this cost could easily be in the tens of thousands.

Worst of all, if you don’t make SG payments by their deadline, and fail to lodge superannuation guarantee charge statements, the ATO may levy penalties of up to 200% of the original superannuation liability for non-compliance.

The bottom line is obvious – missing an SG payment, or making one late, is an expensive risk that’s just not worth taking if it can at all be avoided.

But let’s say it does happen. Then what?

What To Do If I Am Late With a Payment?

First off – don’t panic.

The important thing is that you take the appropriate steps to help minimise any negative impact making a late payment could have on your business; monetarily speaking. And with your reputation in mind.

A good first step would be to visit the Super Guarantee Charge Statement and Calculator Tool on the ATO’s website.

The site details everything you need to know about how to lodge and how to pay. Either electronically or by paper lodgement. Here, convenient tools help you calculate the total SGC for applicable employees.

Hot off the press – Government announces an amnesty for payment of overdue superannuation

On 24 May 2018, the Government announced the commencement of a 12 month Superannuation Guarantee Amnesty.  The Amnesty is a one-off opportunity for employers to self-correct past super guarantee (SG) non-compliance without penalty.

Subject to the passage of legislation, the Amnesty will be available from 24 May 2018 to 23 May 2019.

Employers who voluntarily disclose previously undeclared SG shortfalls during the Amnesty and before the commencement of an audit of their SG will:

  • not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
  • be able to claim a deduction for catch-up payments made in the 12-month period.

Employers will still be required to pay all employee entitlements. This includes the unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge (GIC).

The Amnesty applies to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018. The Amnesty does not apply to periods starting from 1 April 2018 or subsequent periods.

Employers who are not up-to-date with their SG payment obligations to their employees and who don’t come forward during the Amnesty may face higher penalties in the future.

Conclusion

Making late SG payments isn’t ideal. But it doesn’t have to mean the end of the world either. If it happens, try making small, but important changes moving forward to avoid its happening again.

If it’s possible, keep a separate bank account that superannuation is paid into each pay cycle.

When planning your cashflow, consider costs like PAYG withholding and SG contributions, not just the net wages you pay to the employee.

Paying SG contributions late is not cash flow management strategy. It’s a possible sign of mismanagement and insolvency. A means of racking up significant debt, interest bills and penalties. And a lot of extra administrative work.

There’s a lot to get right running a business. And it is not always easy to know what tasks to prioritise. But with what it’ll end up costing you in the long run, it’s well worth doing whatever’s possible to be sure that your SG payments are always on time.