Paying superannuation for your workers is an important part of being an employer. Currently, employers must pay a minimum 9.5% on ordinary time earnings (OTE) to an approved superannuation fund – this is called the ‘superannuation guarantee’ (SG).
Payments Subject to SG
OTE is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift loadings and some allowances, but excludes overtime payments. Superannuation is also payable on:
- Director fees
- Annual leave loading
- Some contractor payments
Superannuation is NOT payable on the following payments:
- Wages for employees aged under 18 and working less than 30hrs/week
- Wages of less than $450/month
- Unused leave entitlements as part of a termination payment
- Government paid parental leave payments
Payment Due Dates
Superannuation payments must be paid on quarterly basis by the due dates outlined below:
|Quarter||Period||Payment 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|
Some employers elect to pay their staff SG more frequently than this (e.g. monthly or weekly) for cash flow reasons which is also fine.
SuperStream is the way businesses must pay employee SG contributions to superannuation funds. With SuperStream money and data are sent electronically in a standard format, usually via a superannuation clearing house.
The most common ways for employers to be SuperStream compliant is to pay employee SG contributions via the ATO’s free clearing house or directly through the payroll software (e.g. Xero or MYOB).
Related-party SG contributions to SMSFs are exempt from the SuperStream rules and can be paid via electronic transfer.
Super Payments + Tax Deductibility
Superannuation contributions are deemed ‘deductible’ when the physical cash is received by the superannuation fund. Therefore, at both quarter and financial year end, it is important to ensure payment is made with enough time for superannuation contributions to be physically received by the fund (usually a minimum of 2 – 3 business days prior to the due date).
Importantly, late superannuation payments which are paid after the due date (as per the above table) are deemed non-deductible for income tax purposes.
Superannuation Guarantee Charge (SGC)
If an employer fails to pay an employee’s SG on time and to the right fund, they must pay the superannuation guarantee charge (SGC) and lodge an SGC statement to the ATO. The charge is made up of:
- SG shortfall amounts
- Interest on those amounts (currently 10%)
- An administration fee of $20 per employee, per quarter.
The SGC is also deemed non-deductible for income tax purposes.
If employers lodge their SGC statement late, or fail to provide a statement or information when requested by the ATO during an audit, they can be liable for a penalty of up to 200% of the SGC and which is also non-deductible for income tax purposes.
Risk of ATO SG Audits
With the introduction of Single Touch Payroll (STP), SG compliance is more important than ever. The ATO now have access to regular payroll information which allows for frequent data matching between an employer’s payroll system and their employee’s superannuation fund.
We anticipate the number of ATO SG audits conducted will increase from 1 July 2021 when all remaining employers previously exempt from the STP rules will be required to start reporting their employee payroll information to the ATO on a quarterly basis.
In our experience the risk of ATO SG audits is high where there are:
- Data matching anomalies due to STP
- Complaints made by disgruntled former employees
- Poor historical SG compliance
Employer Super Quick Check
The costs of penalties and non-deductibility of SG contributions where SG obligations are not complied with makes it more important than ever for employers to check they are SG compliant including:
- Check you’re paying all eligible workers (including contractors who may be entitled)
- Check you’re paying the required minimum of 9.5% of their ordinary time earnings
- Check you’re paying on time (refer above table) otherwise a superannuation guarantee charge applies which is not tax deductible
- Check you’re paying to the right place, the right way (e.g. via a SuperStream clearing house)
Contact our office for further assistance with any concerns regarding your superannuation guarantee obligations.
Visit the ATO site for more information: https://www.ato.gov.au/business/super-for-employers/