Superannuation Guarantee – What is the Real Cost if I Don’t Pay My Employee’s Superannuation on Time?

In our December 2017 newsletter we discussed what happens if an employer does not meet their superannuation obligations – see https://www.kbca.com.au/salary-sacrifice/.  To further explain the financial consequences we have provided a worked example below.

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.

 

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.

Please contact our office for further information about what you need to ensure the amnesty applies to your overdue superannuation contributions.  It is important you take action now and don’t wait for the ATO to commence audit activity.