Fact Sheet: Superannuation Guarantee
Employers are obliged to contribute 9.5% of an employee’s Ordinary Times Earnings (OTE) to a superannuation fund on behalf of their employees.
In many cases, paying Superannuation Guarantee (SG) contributions is a straightforward process but too frequently employers are getting it wrong. Mistakes often arise because of the complexity of the law but can nevertheless be expensive and have significant consequences for employers.
Where do employers typically get SG wrong?
Incorrect treatment of contractors, part-time or casual staff. A contractor can still be deemed to be an employee for SG purposes.
Calculation of OTE, specifically when paying certain allowances, bonuses, workers compensation, jury duty, leave payments and redundancies. It is also common for errors to occur where a payroll system has been set up incorrectly.
Salary sacrificing arrangements.
Use of clearing houses. Employers must ensure sufficient time is allowed for the clearing house to make payments to the respective superannuation funds before the payment due dates. SG obligations are not satisfied until the superannuation fund receives the contributions (with the exception of the Small Business Superannuation Clearing House). Most clearing houses require up to ten days to process contributions.
Delays in receiving choice of fund information for new employees. SG payments must still be made by the due date and payment may instead need to be made to the employer’s default fund.
Non-payment of SG for employees.
What happens if an employer has an SG shortfall amount?
Failure to make correct on time payments can result in an SG shortfall. The consequences of this can include the following:
Loss of tax deductibility for superannuation contributions.
Shortfall percentage applied against salary and wages (rather than OTE) which generally includes a far greater range of remuneration amounts paid to employees. For example, overtime payments do not generally constitute OTE but are included in salary and wages.
Imposition of a range of penalties and interest which can include a penalty of up to 200% of the shortfall amount.
Administration fees of $20 per employee per quarter of shortfall.
Company directors can be held personally liable for unpaid SG amounts for employees.
Why is this important now?
The Australian Taxation Office (ATO) has recently undertaken a renewed focus on SG compliance by employers. In addition to being given additional funding by the Federal Government, they have moved from a practical compliance approach to a far more aggressive approach to SG compliance.
SG Amnesty
As part of this focus, the Federal Government has re-introduced into Parliament SG Amnesty provisions which have now been passed and are awaiting Royal Assent. This amnesty will be applicable for SG shortfall voluntary disclosures made during the period 24 May 2018 until 7 September 2020.
To qualify for the Amnesty:
A shortfall of SG occurred as far back as 1 July 1992 up until the quarter ending 31 March 2018 (this means any shortfalls that have occurred since this date will not be covered by the amnesty);
Disclosure must be made during the amnesty period.
Summary of the Amnesty:
Both the SG Charge and late contribution payments will be deductible where amounts are paid during the amnesty period;
Penalties and administration fees will be reduced to nil;
Higher penalties will apply where an employer fails to disclose a shortfall amount under the amnesty. Any remission of these penalties will also be limited.
What should employers be doing to ensure compliance?
We strongly encourage employers to undertake an SG health check on their payroll systems.
Where any non-compliance issues are identified, make a voluntary disclosure and work with the ATO to rectify shortfall amounts and ensure further shortfalls do not arise.
Most commonly the ATO will initiate an initial SG review with an employer where the ATO have received direct complaints from employees or increasing through their use of risk profiling and data analytics gained as a result of the single touch payroll requirements. Failure to respond to the ATO’s initial queries can result in a full SG audit.
Key features of the SG system – a reminder
9.5% of OTE must be contributed for eligible employees up to a maximum contributions base .
Contributions must be made to a complying superannuation fund.
Payments must be received by the super fund no later than 28 days after the end of the quarter.
Contributions made on-time are tax deductible to the employer.
Would you like to know more?
Our team can perform an overall health check of an employer’s SG compliance and focus on:
⇒ review of the overall superannuation payment arrangements including a sample selection of staff
covering different types of employment arrangements.
⇒ review of contractor arrangements for SG purposes.
⇒ review items of remuneration to determine their inclusion or exclusion from SG payments made on
time and/or late payments.
⇒ assist with calculating shortfall amounts, where needed.
⇒ assist in liaising with the ATO to lodge shortfall statements, where needed.
