Superannuation and the ATO

Insights24 Feb 2021

By Scott Butler, Wayne Kelcey, Katherine Payne, David Dickens, Adrian Lasky and Hector West

In the third of our series of articles on the avenues for businesses to deal with their overdue tax debts, we look at overdue superannuation.

By Scott Butler

In the third of our series of articles on the avenues for businesses to deal with their overdue tax debts, we look at overdue superannuation.

Generally, if an employer pays an employee $450 or more before tax in a calendar month, the employer will be required to pay the employee superannuation on top of the employee’s wages.^[1] This payment is required regardless of whether an employee works full-time, part-time or casually.

Super Guarantee

An employer must pay SG at a rate of 9.5% of an employee’s ordinary time earnings (OTE), which is the salary or wages an employee earns for their ordinary hours of work (which includes commissions, shift loadings and allowances, but not overtime payments).^[2] If the employee’s OTE exceeds the maximum contribution base in any given quarter, the employer does not need to pay SG on any amount which exceeds the maximum contribution base.^[3] The maximum contribution base for the 2019-20 income year is $55,270 per quarter.^[4]

Payment of SG into an employee’s fund is due quarterly according to the following due dates:

for the 1 July – 30 September quarter: 28 October;
for the 1 October – 31 December quarter: 28 January;
for the 1 January – 31 March quarter: 28 April; and
for the 1 April – 30 June quarter: 28 July.^[5]

Single Touch Payroll

Since 1 July 2019 all employers have been required to report employees’ payroll information (such as salaries and wages, pay as you go (PAYG) withholding and super) to the Australian Taxation Office (ATO) through STP-enabled software each time the employer pays the employees.^[6]

The STP system assists the ATO in ensuring that employees are paid their correct entitlements through allowing the ATO to match the STP information to its employer and employee records.^[7] With this data, along with PAYG withholding reports, individual income tax returns and super guarantee payments reported by super funds, the ATO identifies employers that are at high risk of not meeting or are suspected to have not met their SG obligations. In doing so, the ATO will take into account factors such as an employer’s industry, size and prior compliance history.^[8]

Super Guarantee Charge

If an employer fails to pay the appropriate SG to the correct fund by the due date for payment, they will be liable to pay the superannuation guarantee charge (SGC), which is made up of:

SG shortfall amounts calculated on an employee’s salary or wages;
interest currently at a rate of 10% on the SG shortfall amounts; and
an administration fee of $20 per employee, per quarter.^[9]

Any super contributions an employer has made can be deducted from the SGC payable using the appropriate equation.^[10]

The employer will be required to lodge an SGC statement to the ATO and pay the SGC according to the following due dates:

for the 1 July – 30 September quarter: 28 November;
for the 1 October – 31 December quarter: 28 February;
for the 1 January – 31 March quarter: 28 May; and
for the 1 April – 30 June quarter: 28 August.^[11]

The ATO will investigate any enquiries that have been made by an employee about unpaid super once the due date for the lodgment of an SGC statement has passed.^[12]

Interest and penalties

A general interest charge (GIC) is payable where the SGC is not paid by the due date. GIC accrues from the date the SGC is due to the date the SGC is paid in full. The ATO may also impose penalties in addition to the SGC, for example:

a penalty where an employer lodges an SGC statement late or fails to provide a statement or information when requested;
an administrative penalty where an employer makes a false or misleading statement to pay less SGC;
additional penalties where an employer does not keep adequate records, fails to pass on an eligible employee’s TFN to their super fund within a required time frame, or enters into arrangements to avoid their SG obligations; and
a choice liability where an employer does not allow an eligible employee a choice of super fund.^[13]

ATO’s approach

In seeking compliance with SG and SGC payments, the ATO will tailor their approach according to if an employer:

actively engages with the ATO;
experiences difficulty meeting their SG obligations; or
is unwilling to meet their SG obligations.^[14]

Additional penalties will be lower for employers that actively engage with the ATO and have a history of compliance. An employer is considered to have actively engaged with the ATO if they maintain regular contact, provide any requested information and take any required corrective action the ATO requests.^[15]

Where an employer does not actively engage with the ATO, such as through repeatedly failing to pay the correct SG amounts, attempting to obstruct the ATO from determining an SGC liability, deliberately supplying irrelevant or misleading information, or repeatedly failing to keep appointments or supply information, the ATO will take compliance action. This action can include:

issuing the employer with a direction to pay SGC;
issuing a garnishee notice;
issuing a director penalty notice or statutory demand; and/or
commencing a winding up action.

[1] See Superannuation Guarantee (Administration) Act 1992 (Cth) s 27.
[2] See Superannuation Guarantee (Administration) Act 1992 (Cth) s 6(1).
[3] See Superannuation Guarantee (Administration) Act 1992 (Cth) s 6(1).
[4] Australian Taxation Office, Maximum super contribution base.
[5] Australian Taxation Office, Super lodgment.
[6] Australian Taxation Office, Single Touch Payroll,.
[7] Australian Taxation Office, What is STP?.
[8] Australian Taxation Office, Superannuation Guarantee: understand out compliance approach.
[9] Australian Taxation Office, Superannuation Guarantee: understand out compliance approach.
[10] See Superannuation Guarantee (Administration) Act 1992 (Cth) s 22 and 23. This equation was last amended by the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Act 2019 (Cth), which came into effect on 29 October of 2019.
[11] Australian Taxation Office, The super guarantee charge (SGC).
[12] Australian Taxation Office, Report unpaid super contributions from my employer.
[13] Australian Taxation Office, Superannuation Guarantee: understand out compliance approach.
[14] Australian Taxation Office, Superannuation Guarantee: understand out compliance approach.
[15] Australian Taxation Office, Superannuation Guarantee: understand out compliance approach.