The ATO has increased its review of employers to ensure compliance with their superannuation payments, with a particular focus on late payments.
As an employer it is therefore critical that superannuation payments are made on time and in full.
Superannuation payments as late as even one day can end up costing employers thousands of dollars in interest and administrative fees.
Below we outline the consequences that an employer or Director of any employing company may face as well as the steps to take should an employer make a late payment of superannuation.
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.
With this vigilant approach, all employers should comply with superannuation guarantee payments.
Navigating a late superannuation payment
Should an employer recognise that they have not met their superannuation obligations in full, or paid late, 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).
This statement notifies the ATO of the shortfall or late payment of superannuation and calculates the nominal interest component and administrative component ($20 per employee).
This nominal interest component is then 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.
It is important to note that if an SGC statement if not lodged, at some point the ATO will receive notification that there has been a late payment through the various channels listed above. Sometimes this does not happen for some time (can be 1 – 2 years after the fact, in some cases).
The ATO has limited to no discretion to reduce the nominal interest component or administrative component, and it is critical to act and lodge as soon as possible.
Worked example:
Joe was driving to work on Monday the 31st of July and has realises that his staff superannuation was due on Friday the 28th of July 2023, however he was out seeing a wholesaler for the day and forgot to pay it.
The total employee superannuation for the June 2023 quarter was $39,600. Joe makes payment first thing on Monday the 31st of July 2023. As it was only three days late, Joe doesn’t think anything of this late payment and does not lodge an SGC statement with the ATO.
It is now the 1st of October 2024 and Joe receives a letter from the ATO advising that his June 2023 quarter superannuation was paid late and that he needs to lodge an SGC statement for the quarter to avoid further review and potential audit from the ATO.
Joe quickly calls his accountant and asks her to prepare the SGC statement, which she promptly does. The accountant sends him a copy of the SGC statement to sign, along with a payment slip for an amount due of $5,156.06. This amount is made up of $4,676.06 of interest and $480 in administrative fees (24 staff x $20).
As you can see, although the superannuation payment was only three days late, it has cost Joe a significant amount as he failed to lodge the SGC statement back in July 2023.
The penalties
Voluntarily disclosing to the ATO is the best recourse for dealing with late superannuation payments.
Should the ATO discover 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.
A warning to Directors
A Director may be personally liable for the debt should the ATO issue a Director penalty notice.
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 personally liable.
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.
Should a late payment be uncovered, the employer should contact their tax advisor to assist with the preparation and lodgement of SGC statements.
The ATO will likely uncover the non-compliance and act accordingly, which will result in an amount due for interest and administrative fees. In some cases, the late payment may also result in harsher penalties and potential Director liability as listed above.
It is important to note that sometimes even if the superannuation is paid by the 28th of the month following the end of the quarter, if it doesn’t reach the employee’s superannuation fund by this date, it can be considered late. There is usually some lag time between the two, due to the superannuation payment being passed through a clearing house before being allocated to the employee’s superannuation account.
Therefore, it is highly recommended to make payment of your employee superannuation as soon as possible after the end of each quarter.
Should you need any assistance with understanding superannuation payments and your obligations as an employer, please contact your Hall Chadwick QLD advisor.
