Lodging and paying employees superannuation is a legal requirement for businesses. Despite this, non-payment rates in Australia are high.
In the 2017 financial year, the ATO wrote off over $219 million of super debt. As well as being bad news for the workers left with a hole in their future nest egg, it’s also bad news for those dodging payment who are now being held increasingly accountable.
Here we take a look at exactly what your super requirements are, as well as how unpaid super can hurt you and your business.
Clearing up compulsory super
Under Australian tax law, if you pay an employee $450 or more a month, you must pay super on top of their wages into a complying super fund of their choice.
While the figure is not capped, the minimum you must contribute is called the superannuation guarantee (SG). This is currently set at 9.5% of an employee’s ordinary time earnings and must be paid at least four times a year.
If you fail to lodge and pay by the quarterly due dates detailed below, you may have to pay a superannuation guarantee charge:
Super due dates
- 28 October
- 28 January
- 28 April
- 28 July
Superannuation guarantee charge (SGC)
The superannuation guarantee charge consists of:
- your super shortfall amounts
- interest on those amounts – currently set at 10% and;
- an admin fee of $20 per employee, per quarter.
If you miss a payment, you must report and rectify it by filling in a superannuation guarantee charge statement by the following due dates and paying the ATO:
SGC due dates
- 28 November
- 28 February
- 28 May
- 28 August
To help you calculate and lodge your SGC, you can use the ATO’s statement and calculator tool.
Additional consequences to non-payment
Due to the enormous shortfall in superannuation payments, the government has prioritised the collection of unpaid SGC debts. This has been assisted by the introduction of single touch payroll in July 2018, which makes it easier for the ATO to track payments.
If you fail to work with the ATO and pay your super, they may take stronger action against you. This could include:
SGC audit or review
This involves the ATO going through your records to calculate your outstanding super debt and make sure you’ve lodged and paid correctly.
A garnishee notice is sent by the ATO to someone who owes you money or holds money for you, such as a customer or bank. This requires them to pay their debts or the money they hold for you directly to them to cover the debt.
Director penalty notice
If the ATO issues you with a director penalty notice, you become personally liable for your super debt amounts. Liability can be avoided if you pay the outstanding amount at any time. It may also be remitted if you go into liquidation or administration.
If the situation is still not resolved and your super debt continues to go unpaid, the ATO can then take the strongest action: issuing a statutory demand. This is an application for a court hearing which can result in your business being wound up.
Solutions to the super struggle
If you know you can’t pay your employees super by the quarterly due date you must do the following to avoid these further consequences:
- Lodge your SGC statement by the SGC due date.
- Contact the ATO to discuss your situation and apply for an ATO payment plan.
Once lodged and paid, the ATO will then distribute your SGC, plus interest, to your employees’ super funds.
Don’t dodge it, lodge it
If you’re in a situation where your business is struggling and paying super is becoming a problem, the worst thing you can do is try to avoid it. By submitting an SGC statement on time and discussing your options with the ATO you can skip the super stress.
For more information on director advice, check out our director advice page here.
Unable to pay your super debt or worried about insolvency? Get in touch today.