As an employer it is vital that superannuation payments are made on time and in full. Public and government opinion now equates the non-payment or underpayment of superannuation to wage theft, accordingly the ATO has increased its review of employers to ensure compliance with their superannuation payments. The penalties for late or non-payment of superannuation can be severe and the ATO has minimal discretion to reduce the penalties.
This article explores the steps an employer should undertake if they have made a late payment of superannuation, as well as outlining the penalties an employer or a director of an employing company may face as a result of late or underpayment of superannuation and ways in which to reduce the application of the penalties.
When is a Superannuation payment considered late?
Superannuation is required to be paid into your employee’s superannuation accounts 28 days after the end of the quarter.
Until ‘payday superannuation’ arrives on the 1st of July 2026 (where employers will need to pay superannuation at the same time as wages), employers should be vigilant in meeting the due dates, as a payment that arrives even one day late is still considered late.
The ATO has a number of methods of uncovering a late superannuation payment, including;
- Data received from the superannuation funds and via Single Touch Payroll.
- An ATO review or audit of the employers’ tax affairs.
- A report from an employee about non-compliance of superannuation.
Employers should not believe they can hide from the ATO and therefore should comply with all superannuation guarantee payments.
Mitigating a late superannuation payment
Once an employer recognises that they have not met their superannuation obligations in full, they should immediately prepare and lodge a superannuation guarantee charge (SGC) statement.
An SGC statement is due 1 month after the superannuation payment was due. (i.e. the March quarter SGC statement is due on the 28th of May, being one month after the 28th of April due date).
An SGC statement notifies the ATO of the shortfall in superannuation and calculates the nominal interest component and administrative component ($20 per employee). Nominal interest component is calculated at a rate of 10% from the first day of the quarter that the superannuation was not paid until the later of the due date of the SGC statement or the date the SGC statement is lodged.
The ATO has limited to no discretion to reduce the nominal interest component or administrative component.
ATO penalties
Voluntarily disclosing to the ATO is the best recourse for dealing with late superannuation payments. If the ATO discovers your late superannuation payments in a review of your affairs, they can apply “Part 7 penalties” which starts at 200% of the liability, with ATO discretion required to reduce or remit the 200% penalty.
Taxpayers should be aware that the ATO has an unlimited timeframe if dealing with late superannuation payments, so the typical two year / four year review period does not apply to superannuation compliance.
Directors beware
Superannuation guarantee payments fall under the director penalty regime, meaning that if an employer does not meet its superannuation guarantee payments, the ATO can issue a director penalty notice, rendering the director/s personally liable for the debt.
Example scenario
Consider the below scenario of how costly a late superannuation payment can be for a company.
- Company A has a superannuation guarantee liability for the December 2022 quarter of $50,000 from 30 employees.
- Company A misses the 28th of January 2023 deadline, and instead makes payment on the liability on the 10th of February 2023, when they realised the non-payment.
- No further action is undertaken by Company A, as they believed that as they made the payment, the debt had been cleared.
- The ATO conducts a review of Company A’s accounts to ensure compliance and uncovers the late payment in December 2023.
- Following a request from the ATO, Company A, lodges their SGC statement in December 2023.
- The SGC Statement calculates a liability of $56,850:
- $50,000 for the superannuation guarantee paid late.
- Nominal interest of $6,250 (Calculated as $50,000 x 10% annual rate interest x 15 months).
- Administrative component of $600 (30 employees x $20).
- The payment made in February 2023 is used as an offset to reduce the amount owed to $6,250.
- As Company A did not voluntarily disclose the late payment or lodge an SGC statement in time, the ATO applies Part 7 Penalties of 200% of the total liability (which doesn’t include the offset) of $113,700.
- The total amount owing for Company A is now $119,950.
- The Part 7 Penalties and SGC Liability are also non-deductible for tax, negating a tax benefit of $12,500 the company would have received on the $50,000 payment, if it was made on time.
In the above scenario, a $50k late payment has ended up costing the company $132,450. With the potential for the $119,950 to be captured via a director penalty notice.
Tax planning for payment of superannuation
Appropriate tax planning should be undertaken when making payment of the late superannuation, as any payment of late superannuation including interest and administrative penalties is non-deductible for income tax purposes.
If payment of the superannuation guarantee was made after the due date, it can instead be used against a future quarter payment, making the payment deductible for tax purposes.
Conclusion
If you think there is any chance that a superannuation payment has been made late, employers should immediately review their records to ensure the due dates have been met. If non-compliance is uncovered employers should contact their tax agent to assist with the preparation and lodgement of SGC statements and appropriate tax planning.
The ATO will likely uncover the non-compliance and act accordingly, which in a worst-case scenario can see the Directors of the company becoming personally liable for the debts.
Credit Tom Peskett, Senior Manager, Tax Consulting for co-authoring.