Super Guarantee Charge: How to Avoid Super ATO Audit Stress

Missing super payments triggers Super Guarantee Charge penalties up to 200% of shortfall. Learn SGC costs, due dates, and how to avoid ATO audit stress.

Many super stressful things go hand in hand with being a business owner. Still, if you’re prepared and follow our handy best practice recommendations, Superannuation ATO audits don’t need to be one of them.

Read on below to find out more about what Super Guarantee Charge statements are, the costs involved if super isn’t paid on time, how to ensure you’re ahead of your super payments, and how this can play out for businesses.

Key highlights:

Super Guarantee Charge (SGC) Compliance is Crucial – Businesses must pay employee superannuation on time to avoid SGC penalties, which include interest, administration fees, and potential fines of up to 200% of the shortfall.
Late Super Payments Can Be Costly – Missing a super payment means losing tax deductions, facing ATO penalties, and dealing with significant financial liabilities. Lodging an SGC statement is mandatory if payments are late.
Best Practices to Avoid Penalties – Use automated payroll systems, align super payments with payroll cycles, and stay updated with ATO rules to ensure compliance and avoid costly audits.

What Are Super Guarantee Charge (SGC) Statements?

Super Guarantee Charge statements are critical financial documents for any Australian business. They outline any superannuation contributions due for employees that haven’t been paid into their super funds by the mandatory due date.

These statements are more than just paperwork. In fact, they are a legal obligation: businesses must complete and lodge these to the Australian Tax Office (ATO) within one calendar month after the super-due date. Failure to do so can result in penalties, significantly impacting a business’s financial health.

The ATO requires accurate and timely reporting to ensure that employees receive their entitled super contributions. If a business fails to meet its super obligations, it must lodge an SGC statement and pay the associated charges, which include interest and administrative fees.

When are super payments and SGC payments due?

Super payments for your eligible employees begin on their first job day. You’ll need to ensure the quarterly super due dates for these payments are met. Paying more frequently, such as fortnightly or monthly, is fine – many businesses do! The key thing is that the total super contribution for each quarter is paid by the due date.

SG Quarter	Date payment due	SGC & SGC statement due date
1 July – 30 September	28 October	28 Nov
1 October – 31 December	28 January	28 Feb
1 January – 31 March	28 April	28 May
1 April – 30 June	28 July	28 Aug

If a super payment happens to be late, you must submit a Super Guarantee Charge (SGC) statement form to the ATO. This form helps calculate the outstanding amount. The deadline for the SGC statement form and the payment is one calendar month after the original super due date.

Here’s the kicker: The ATO considers super payments made after the due date as late, even if it’s only by a day, meaning the SGC still applies. There’s no grace period, no “close enough” policy. Miss the deadline by 24 hours? You’re facing SGC charges. This strict approach underscores why getting ahead of your super payments isn’t just good practice, it’s essential.

Understanding The Costs When Super Isn’t Paid By The Due Date

When super payments aren’t made on time, the costs to a business can be substantial. Some of the potential consequences include

Loss of Tax Deduction:

Superannuation contributions are typically tax-deductible, but only when paid on time. When super payments are late, this important deduction is forfeited, resulting in a higher overall tax bill.

Administration Fees:

The ATO levies an administration fee for late super payments. This can amount to as much as $20 per employee per quarter – a significant expense for businesses with multiple employees.

Nominal Interest:

On top of the other costs, a nominal interest charge of 10% per annum is applied to the outstanding super amount. This can add up quickly, further exacerbating the financial impact of late payments.

Maximum Penalty:

On top of these, a maximum super guarantee charge of up to 200% of the super guarantee shortfall can be imposed by the ATO if super obligations are not met. This penalty can significantly increase the cost of late or unpaid super, providing a strong incentive for businesses to make super payments on time.

Best Practice for Paying Super And Staying Ahead

To avoid these pitfalls, businesses should consider the following best practices:

Leverage technology: Utilise accounting software with built-in super payment functionality. Xero offers a feature where businesses can authorise direct debits from their bank account to cover super payments. This automatic process reduces the risk of human error and late fees, making compliance almost effortless. As Xero-certified advisors, we help businesses set up these systems properly. Want to know more? Check out our Xero services.

Align super payments with payroll: Consider aligning them with your regular payroll processing rather than handling them separately. This approach simplifies administration and improves cash flow management. Rather than facing a sizable quarterly payment, the super obligation is spread over each pay cycle.

Stay updated with the ATO’s rules and regulations: Staying on top of superannuation obligations helps businesses avoid unwanted ATO stress and penalties and is a key part of being a responsible employer. Keeping your employees’ super payments up-to-date ensures they’re being provided for in retirement, demonstrating your commitment to their long-term well-being.

How This Works In Business

Let’s assume we have a business owner, John, who has three employees: Emily, Dave, and Sarah. Their salaries are $240,000 annually, and the Superannuation Guarantee (SG) rate is 11%.

For the 2023-2024 financial year, John hasn’t followed our best practice recommendations and failed to pay any superannuation for Emily. Here’s how the Superannuation Guarantee Charge (SGC) and potential penalty would be calculated:

Superannuation Guarantee (SG) Shortfall: The SG for the employees should be 11% of the $240,000 salary, which equals $26,400. This amount is the Superannuation Guarantee Shortfall – the amount of super that John failed to pay.

Superannuation Guarantee Charge (SGC): The SGC includes the SG Shortfall, interest, and an administration fee. The interest is 10% annually, and the administration fee is $20 per quarter. If John’s non-payment spanned four quarters, the interest would be $2,640 ($26,400 * 10%), and the administration fee would be $240 ($20 * 4 * 3 employees). So, the total SGC would be $29,280 ($26,400 super + $2640 interest + $240 admin fee).

Potential Penalty: John could also be liable for additional penalties if he fails to submit an SGC statement by the due date. The maximum penalty is 200% of the SGC. So, in this case, if the ATO imposed the maximum penalty, it would be 200% of $29,280, which equals $58,560.

So, John’s total liability for the year – including the unpaid super, SGC, and potential penalty – would be $87,840 ($26,400 + $2,640 + $58,560).

This example illustrates how seriously the ATO audit takes late or unpaid super and why it’s so crucial for employers to meet their super obligations on time.

It’s worth noting that the ATO does have discretion over whether to impose a penalty and how much it should be. Factors they might consider include whether the employer made an honest mistake, previously complied with their super obligations, and cooperated with the ATO to resolve the issue.

FAQ

What should business owners do if they realise they missed a super payment?

If a business realises they have missed a super payment, the first step is to act quickly. You should immediately calculate the unpaid super and lodge a Superannuation Guarantee Charge (SGC) statement with the ATO. This will ensure compliance and help avoid additional penalties. The ATO may also consider reducing penalties if the business discloses and promptly rectifies the issue.

Can businesses claim Super Guarantee Charge payments as a tax deduction?

No, Super Guarantee Charge (SGC) payments are not tax deductible. Unlike regular super contributions, which can be claimed as a business expense, SGC payments include penalties and interest that are explicitly non-deductible. This makes it even more crucial for businesses to pay super on time to retain their tax benefits.

How does the Super Guarantee Charge affect employee entitlements?

The Super Guarantee Charge (SGC) ensures that employees still receive their entitled superannuation, even if their employer has failed to pay on time. However, instead of the money being directly paid into the employee’s super fund, it is initially paid to the ATO, which then distributes it to the appropriate super accounts. Employees may also receive interest on the delayed payments, ensuring their employer’s non-compliance does not disadvantage them.

Our take? Save yourself the super stress and follow our best practice guide to stay ahead of the game. If you have any questions about Super ATO Audits or paying superannuation to your employees, contact Future Advisory to review your payroll and super compliance. We’ll help you set up systems that keep the ATO off your back and your employees’ super sorted.