What is the Super Guarantee Charge (SGC)?
An employer must pay a minimum amount of super guarantee (SG), currently at 9.5%, into the super fund of an employee’s choice. Contributions must be made quarterly and by the deadlines set by the ATO. As an employer, if you do not comply with this obligation you will be liable to pay a super guarantee charge as follows:
- the shortfall amount;
- interest calculated on the shortfall amount, currently at 10% per annum; and
- an admin fee of $20 per employee, per quarter.
Additionally, employers are liable for penalties of up to 200% of the SGC amount, imposed at the discretion of the Commissioner. SGC and any penalties are non-deductible.
Are you compliant?
If you are an employer and are aware you are non-compliant, it is important that you deal with this issue immediately. The ATO has made it clear that it will be cracking down on non-compliant employers, and the penalties may be significant. If you need help to become SG compliant, chat to us today.
Reasons you may be non-compliant
There are many employers who believe they are doing the right thing regarding their super guarantee obligations, however, for various reasons they may be non-complaint. We will explain these shortfalls below.
- Incorrect calculation of employees’ ordinary hours, and specifically what payments made to an employee may attract and SG obligation.
- Misidentifying allowances, one-off payments, ad-hoc payments and bonuses.
- Not paying SG for contractors who are engaged principally for their own labour – even if they issue tax invoices and provide an ABN.
- Failing to make SG payments to employees by the due date. Payment made late are still subject to SGC, even if the SG obligation is paid in full. Late SG payments must still be disclosed to the ATO.
What is the SGC Amnesty?
The Federal Government has proposed an amnesty for non-compliant employers. What this means – employers who voluntarily disclose their non-compliance to the ATO during the amnesty period would be able to claim an income tax deduction for the SGC, will not have to pay the admin fee and will not be subject to further penalties.
This amnesty was proposed to encourage employers to address any past SG non-compliance. The legislation was initially introduced in May of 2018 but did not pass. It has now been re-introduced, and under the new proposal the amnesty would run for a six-month period after Royal Assent.
This amnesty provides employers with a good opportunity to review their past SG contributions and ensure they have met all their compliance obligations. This amnesty should provide employers with an incentive to make sure they do not have an accidental shortfall in SG payments and time to rectify any historical non-compliance. However, this also means that employers that choose to do nothing and are found to be non-compliant under review or audit will be subject to substantial penalties.
Penalties post amnesty will be a minimum of 100% of the SGC for periods covered by the amnesty, with little hope that the Commissioner will remit, unless there are ‘exceptional circumstances’ that prevented the employer from disclosure.
The amnesty only applies to non-compliance for quarters up to and including the quarter ended 31March 2018. All periods after March 2018 are subject to the full SGC and will not be deductible.
The ATO is currently conducting audits and reviews, any non-compliance detected – even that which falls within the amnesty period – will not be eligible for the amnesty concessions, and is subject to penalties. Additionally, now that SingleTouch Payroll is in full force the ATO has increased capabilities to identify employers who pay their SG obligations late.
If you’re an employer and are SG non-compliant or are unsure if you have met all your SG obligations, it is critical that you get in touch asap so that we can assess your situation and minimise any potential charges and penalties that you may be subject to.