Superannuation
Super guarantee charge
The super guarantee charge is what an employer owes the ATO when super is not paid in full and on time: the shortfall, interest and an administration amount, none of it deductible.
The super guarantee charge, or SGC, applies when an employer does not pay enough super guarantee contributions for an employee, or does not pay them by the due date. Instead of simply paying the late super to the fund, the employer must lodge an SGC statement with the ATO and pay the charge. The charge is more costly than paying on time, because it includes more than just the unpaid contribution.
The SGC has three parts. The first is the super guarantee shortfall, which is the unpaid amount calculated on the employee's salary or wages, and which may be calculated on a broader base than the usual ordinary time earnings. The second is nominal interest, which is calculated from the start of the relevant quarter. The third is an administration component per employee, per quarter. The ATO then distributes the shortfall and interest portion to the employee's super fund.
Importantly, the SGC is not tax deductible, whereas super contributions paid on time are generally deductible. That means late payment increases the cost to the business in two ways: the extra amounts included in the charge, and the loss of a deduction. If an employer makes a late payment of super to the fund, it may still need to lodge the SGC statement, and any payment may be offset against the charge in specific circumstances.
The ATO can raise the SGC on its own, based on data from Single Touch Payroll or an employee's report. Employers who realise they have missed a payment should lodge an SGC statement promptly. The ATO may reduce penalties for those who come forward voluntarily, though the charge itself remains. In more serious or repeat cases, the ATO can apply additional penalties, issue a director penalty notice, or take recovery action.
Because the SGC sits outside the GST system, there is no GST on it and no credits are available. It has no connection with the BAS, apart from the fact that payroll data reported on BAS or through STP can reveal an unpaid liability. Businesses with cash flow problems should talk to the ATO early about a payment plan rather than missing super altogether.
A common mistake is to treat super as optional when cash is tight, or to pay super to the wrong fund and fail to check receipt. Another is to assume that late payment of a small amount does not matter. Even a single missed quarter can trigger the charge.
This is general information only, so confirm your position with the ATO or a registered tax professional.
Worked example
A business owes $5,000 of super guarantee for a quarter and misses the 28-day due date. The owner must lodge an SGC statement. The charge includes the $5,000 shortfall, nominal interest from the start of the quarter, and an administration amount per employee. If interest comes to $250 and the administration amount is small, say $20, the total is about $5,270, and none of it is deductible, whereas $5,000 paid on time would have been.
Practical tips
- Pay super at least a few days before the due date, since the fund must receive it by then.
- If you miss a payment, lodge the SGC statement promptly rather than waiting for the ATO to find it.
- Talk to the ATO early if cash flow is tight, since a payment plan may be available for the charge.