How will the ATO know if I’m late with my employees’ super payments?
With the introduction of single touch payroll (STP), the ATO now receives information from employees about super for each employee for each pay run. The ATO can now data match this information to the information it receives from super funds for all members:
- Paying the super for all employees by the due date is now crucial.
- Case Study: John Smith, an employee of ABC Pty Ltd, accrued super of $2,000 for the September 2020 quarter which was reported to the ATO through STP. John’s super fund reported that it only received $1,500 by 28 October 2020. The ATO data matched this and requested for ABC Pty Ltd to lodge a SGC statement.
What are some of the consequences for paying super past the due date?
If super is paid late, it can have some very negative consequences such as:
- No longer tax deductible for the employer
- The amount of super payable could increase from being just payable on ‘ordinary times earnings’ to ‘total wages’. In one ATO audit, a client that paid lots of overtime to their staff, did not pay their super on time. As a result, this increased their superannuation liability such that superannuation needed to be paid on overtime work as well.
- Directors can become personally liable for unpaid super.
- Paying super on time is crucial, especially if you have employees with higher ‘total wages’ to ‘ordinary times earnings’. If super is paid late, you will need to lodge a SGF statement with the correct superannuation amount.
What if I’m only 1-2 days late?
Even if payment is only a day or two late, the ATO will contact the business to request a ‘SGC’ statement to be prepared and lodged.
- Missing the cut-off date (being 28 days after the end of the quarter) even by a day will result in interest, administrative penalties and in some cases additional super for some employees
- We suggest making any super payments at least 1 week before the due dates to ensure they are received by the super funds by the due date
- Case Study: ABC Pty Ltd paid all of its employees September 2020 quarter super on 29 October 2020, being 1 day overdue. The ATO contacted ABC Pty Ltd about the late payment and required an SGC statement to be lodged. ABC Pty Ltd had to pay nominal interest on all the super for the quarterly and an administrative penalty for each employee paid late.
What should I do if a Super Fund refunds super payments to me?
If a superannuation payment is ‘refunded’ to the employer (eg incorrect member details or SMSF no longer complying), they can still be liable.
- If any details for an employee are wrong, in particular the USI or ABN of the Super Fund or the membership number for the employee, the super fund is required to reject the super payment and refund it to the employer
- Confirm with employees that their super fund and member numbers are correct. If any previous super payments have been refunded, please check with the employees whose details were wrong.
- Case Study: John Smith’s details provided to ABC Pty Ltd was missing his member number with his super fund.
What do I do if I paid my employees’ super late?
Every quarter that superannuation is paid late, the administrative process required by ATO rules is very time consuming to action:
- For each employee that super is paid late, a ‘SGC’ form needs to be filled in and submitted to the ATO.
- A separate form is required for each employee and each quarter.
- Interest and penalties are also payable by the employer
- The process for SGC statements is time consuming and cannot be done in bulk for multiple quarters
- When super is paid late for a quarter, please review the information to see which employees are unpaid or underpaid. This will help with the work for that quarter’s SGC statement.
- Case Study: ABC Pty Ltd has unpaid super for some employees in the last 4 quarters. The company and its accountant must check for each quarter which employees super has been unpaid or underpaid and prepare different SGC statements for each quarter and employee
If you require any assistance with the SGC statements or you are unable to pay your employees’ superannuation on time, please contact your CIB Adviser.