Paying your employees super is compulsory. You know that. But do you know all the ins and outs and financial penalties you’ll face if you aren’t paying the Super Guarantee to your employees correctly?
A word of warning before you get stuck in – this article contains quite a number of abbreviations. So make sure you’re paying attention!
What Exactly is Super Guarantee?
Basically, if you fail to follow the compulsory guidelines for paying Super Guarantee (SG), you’ll be required to pay the Super Guarantee Charge (SGC). So you need a good understanding of the Super Guarantee first, before we delve into the SGC.
The Super Guarantee is the compulsory amount an employer needs to pay into their employees’ chosen super fund.
Employers are required to contribute a minimum percentage of each eligible employee’s earnings to their super fund of retirement savings account. This minimum percentage is currently 9.5% of each employee’s salary or wage.
An eligible employee is a full-time, part-time or casual employee who is over the age of 18 and is paid at least $450 a month, before taxes.
As an employer, you must pay your employees their SG within 28 days of the end of each quarter. If you fail to pay the correct super amount to your employees on time, then you’ll need to pay the SGC to the ATO.
| 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 |
What is the Super Guarantee Charge?
We now know that the SGC is an amount payable to the ATO if you fail to pay your employees’ SG correctly and on time.
This SGC consists of three parts:
- Super guarantee shortfall amounts – the amount an employee was owed in super, but was unpaid.
- Nominal interest on shortfall amounts – currently 10%
- Administration fee – $20 per employee per quarter
If you pay the Super Guarantee on time, you’re paying the 9.5% based on your employees’ ordinary time earnings (OTE) which includes their hours, commission, allowances and bonuses but not including overtime.
If you’re paying the SGC, however, the shortfall amounts are based on the entire salary of the employee including overtime payments and annual leave loading. So the amount payable under the SGC shortfall is likely to be more than the amount payable under the SG.
Additionally, the SGC is NOT tax deductible and can’t be claimed as Super Guarantee contributions are. So you’ll not only be in the deficit with additional cost penalties, but you’ll be unable to claim super contributions or any other additional costs as tax deductions.
How to Pay the Super Guarantee Charge
The SGC is a self-assessed scheme that runs based on the honesty of the employer. So if you realise that you should be paying the SGC, it’s up to you to report yourself and lodge all necessary paperwork and payments.
Employees can also report their employers if they think their super contributions aren’t being paid correctly. So don’t underestimate your staff.
First, you’ll need to submit an SGC statement which will alert the ATO that you’ve not met the SG requirements for the previous quarter. Be warned that if you fail to lodge this on time, you may also be up for an additional penalty of up to 200% of the charge amount.
You can use the ATO’s Super Guarantee Charge Statement and Calculator Tool to calculate your SGC liability and generate a PDF version of the SGC statement.
You’ll have until the 28th day of the second month after the end of the quarter to lodge your SGC statement and make payment. If you lodge your statement on time, but not your payment, you may be liable for a further general interest charge which will accrue overtime until the SGC is paid in full.
| Quarter | Period | Payment Due Date |
| 1 | 1 July – 30 September | 28 November |
| 2 | 1 October – 31 December | 28 February |
| 3 | 1 January – 31 March | 28 May |
| 4 | 1 April – 30 June | 28 August |
Once the payment has been collected, the super guarantee shortfall and interest will be transferred to your employees super fund. The administration fee and any other additional penalties go to the ATO.
What if You Don’t Pay the Super Guarantee Charge?
You may be thinking “If it’s based on an honesty system and my employees are unlikely to notice – what’s the harm if I don’t lodge?” But like everything, you won’t be able to get away with it forever, and as time goes on it will only get worse.
If you fail to lodge SGC statements and payments it may trigger:
- A complete SGC audit to determine the full unpaid super debt
- The issue of a Director Penalty Notice which makes the director of a company personally liable for this unpaid super.
- The sending of a Garnishee Notice to a person who owes employees money and requiring them to pay any funds owed, or a portion of them, to the ATO instead.
All of these can be damaging to you personally, but also to your business. You’ll be facing financial penalties and a big hit to your reputation as a business owner and employer.
