This is part 3 in our Superannuation for Employers series. Part 1 covered obligations when onboarding a new employee and part 2 covered your obligations as an employer, how much super you must pay, when it must be paid and how to pay it. Part 3 will now cover what happens if you miss a payment or pay late.
If you haven't already, we strongly advise you to read part 1 and 2 before proceeding with part 3.
What timeframe is acceptable for late payments?
As discussed in the first two parts of this series, Super is only considered paid when the funds clear into the employee's bank account. This means that a payment that's due on July 28th but clears on July 29th is considered late. Superannuation obligations are legislated which means the ATO Commissioner doesn't have any room to make exceptions or grant extensions.
What needs to be done when a payment is late or missed?
If you miss a payment or it clears into the fund late, the first thing you need to do is prepare or have your bookkeeper or tax agent prepare a Superannuation Guarantee Charge Statement. The SGC statement will declare the late or missed payment to the ATO and the payment will then be payable to the ATO rather than directly to the employee's fund. A new statement will need to be filled in for each financial quarter that super was missed or paid late for.
As part of filling in the SGC statement, the ATO will charge you an administration fee of $20 per employee per quarter as well as notional interest. Notional interest is charged and paid directly to the employee's superannuation fund due to the payment being made late. This type of interest stops being charged the day that the SGC forms are lodged and the ATO Commissioner has no discretion to waive this interest as it is also legislated.
Once the SGC forms are lodged, the ATO will create a Superannuation Guarantee Charge account for you to pay the missed super or admin fees and interest to. To speed up this process you're able to phone them and get payment details over the phone as the forms can take weeks to process sometimes.
Although notional interest stops being charged when the SGC forms are prepared, general interest can be charged from the time they are processed right up until the time the payment is made. General interest is charged from the ATO and they do have discretion to waive this if payment is delayed for what they deem an appropriate reason.
Will penalties be charged?
The ATO does have discretion to charge penalties for late or missed superannuation payment. It's rare for them to do so when you come forward and declare the non-compliance, and is more common for penalties to be charged in the event of an audit. For this reason, it's encouraged to make the voluntary disclosure.
What other consequences apply?
The main consequence outside of interest and administration fees is that late superannuation payments are not deductible. This means that if you miss the deadline and the superannuation doesn't clear on time you won't be eligible to claim a deduction for it and it will increase your tax liability.
In summary, the consequences of late payment are:
Notional interest charges
Loss of deduction
Potential general interest charges
How will the ATO know that my payments have cleared late?
This is where Single Touch Payroll and Clearing Houses come into play. Single Touch Payroll reports your superannuation liability to the ATO each time you process wages, and the ATO have access to clearing house and superannuation data to determine when the payment was processed. This means that if you don't voluntarily disclose the late payment it's only a matter of time before they catch up with you.
Want more information or help to fill in your Superannuation Guarantee Charge forms? Contact us at firstname.lastname@example.org or on 07 4334 0002.