In the last few months we have noticed a change of approach by the ATO to superannuation guarantee (SG) compliance activities for small business employers. Previously, the ATO’s approach was more practical and educational, now they are taking a stricter and more aggressive approach.
This has resulted from funding being provided by the Federal Government to pursue non-compliance and a view that a stronger stance is required to ensure employers are meeting their obligations in compliance with the law.
We have contacted our clients to ensure they are meeting their obligations, in particular in the areas of on-time payments and inclusion of the right components of employee remuneration when calculating contributions amounts.
Non-compliance with superannuation guarantee obligations can lead to significant penalties and fees for employers and the loss of tax deductibility for superannuation contributions.
What is the super guarantee charge (SGC)?
If employers don’t pay the minimum amount of super guarantee (SG)(currently 9.5%) for their employee into the correct fund by the due date employers may have to pay the super guarantee charge (SGC), which is not tax-deductible.
The charge is made up of:
- SG shortfall amounts (including any choice liability calculated on employee’s salary or wages)
- interest on those amounts (currently 10%)
- an administration fee of $20 per employee, per quarter.
Employers must report and rectify the missed payment by lodging an SGC statement by the due date and paying the SGC to the ATO.
WARNING! As you can see from above, late SG payments lead to additional compliance hassle and penalties for business. We strongly recommend clients to review their payroll system to ensure SG payments made on time:
TIPS! It is required that the SG payments received by employees’ super funds before the above mentioned due dates. To allow extra time for SG payments being cleared and transferred, employers should process SG payments 3-5 business days earlier.
For employers using Xero automate super, SG obligations become much easier to manage (and thus, risk of ATO super audit much reduced), thanks to Xero’s smart superannuation reminders. Contact US to get the Xero automate super up and running, so you can save a significant amount of time, and spend it on growing your business.
Cloud8 recommendations and solutions
As the consequences of non-compliance with the SG laws are significant, the best course of action is for employers to review of their processes and payments to ensure they are complying with their legal obligations.
We recommend employers to:
- review their current payroll system, if require, employers should convert their current system to a cloud based payroll system with auto super payment function
- if employers discover that they have missed a payment or haven’t paid an employee’s super on time. Contact US, we can assist you to lodge a Super guarantee charge (SGC) statement to the ATO and pay the super guarantee (SG) charge on any SG shortfall amounts.
It’s time to act! Employers may be entitled to the proposed SCG amnesty which can reduce penalties. Simplify book an obligation appointment with the button below: