There’s a surprise in store if the boss doesn’t pay employees’ superannuation on time. And it’s not very pleasant, says chartered accountant GAIL FREEMAN.

Ari looked very worried. He called to explain that he’d forgotten to pay his employees’ superannuation a few months ago.

“I couldn’t work out how to do it with the new system and it took me a while to work out what I needed to do,” he told me.

“So I rang the ATO and they told me I had to pay the superannuation guarantee charge (SGC). What is that?”

I broke the news that, unfortunately, by not paying the superannuation on time, regardless of the reasons, the legislation says the SGC has to be paid.

“Currently you have to pay superannuation for your employees known as the Super Guarantee (SG) at least once a quarter,” I told him.

“Although some businesses may have to pay it more frequently. In your case, your employees’ SG needs to be paid by January 28, April 28, July 28 and 28 October each year until new requirements come in.

“Starting on July 1 2026 the SG will need to be paid at the same time as employee wages are paid.

“Just by way of background, from July 1 2023 the rate is 11 per cent of ordinary time earnings (which excludes overtime) it increases on July 1, 2024 to 11.5 per cent and then on July 1 2025 it increases to 12 per cent. At this stage there are no further increases legislated. Super has to be paid to the employees’ chosen superannuation funds.

“So if it is not paid on time, SGC comes into play. The superannuation component has to be recalculated using the wages paid including overtime plus nominal interest plus an administration fee. The nominal interest currently is at the rate of 10 per cent and is calculated from the beginning of the quarter that the superannuation relates to until the date that the SGC form is lodged.

“In addition there is an administration charge of $20 per employee.

“The sting in the tail is that this whole payment is not deductible in your tax return. The legislation does not allow for errors, it is black and white if the super is not paid on time the non-deductible SGC comes into play.”

I told Ari there was a form called the SGC statement which must be used to calculate SGC liability.

“The ATO recommends that you lodge this form online,” I said.

“You will need to lodge a separate form for each quarter. So it is a messy and costly process. It is always preferable that you lodge and pay your SG on time.”

Whilst we are talking super I reminded Ari that employees are able to choose their super fund. There was now a system in place where a superannuation fund is “stapled” to an employee.

“So when a new employee commences with you, if they don’t know their super details, you can contact the ATO to get details of their stapled superannuation fund,” I said.

“This is so that employees do not get a new superannuation fund with every job that they have.”

Ari said: “I had no idea how SGC worked. I am in control and I will never forget to pay my employee’s super on time again.”

If you need information on Superannuation, the SGC or any other tax related or financial matter, contact the expert team at Gail Freeman & Co Pty Ltd on 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.