25 November 2019
It is vitally important that employers pay their superannuation guarantee obligations on time as even a marginal late payment of an employee’s superannuation can result in potential harsh penalties and interest amounts owing.
For example, we have had a recent situation where a client paid their employees superannuation obligations late by 5 days and 7 days respectively for the quarters ending 30 September 2018 and 31 December 2019.
Due to the information received via the Single Touch Payroll system, the ATO was aware of the late payment and recently undertook a review.
As a result of the review an amount of interest was imposed on the late payment of the Superannuation Guarantee. The interest amount imposed was not calculated on the amount of days the payment was late (i.e. 5 days and 7 days), it was calculated from the 1st day of the quarter (i.e., 1st of July 2018 and 1st October 2018) to the date of lodgement of the superannuation guarantee charge (SGC) form at a rate of 10% p.a.
In this case this was lodged as part of the ATO review which just completed recently, 5th November 2019. The late payment has resulted in the following interest charges:
| Q1 18/19 Interest | Q2 18/19 Interest | Total Interest |
| $13,380.36 | $10,991.96 | $24,372.32 |
What the client originally thought to be a potential $328.34 penalty interest charge ended being a $24,372.32 interest penalty charge plus 2 lots of administration penalties which is charged at $20 per every employee. This was an additional charge of $1,220 and $1,300 respectively for the two quarters to total $2,520 in total. The actual total interest and administration charges equated to $26,892.32 ($24,372.32 interest & $2,520 administration charges). The ATO also have the power to charge a maximum 20 penalty that is 200% of the amount of the charge payable. Fortunately for the client, the ATO chose not to apply the maximum penalty.
This also means if that if you are a business and you are aware that the superannuation has been paid late you should immediately lodge SGC Statement form to minimize the interest and administration charges.
If you don’t you are running the risk of being heavily penalized if the ATO conducts a review as illustrated above. With the implementation of Single Touch Payroll the ATO can access this real time information and determine if a business is up to date with their employees superannuation payments being processed on time (i.e., the 28th of every quarter).
The ATO is also stipulates that when completing the SGC statement form that you must include each employees gross wage to calculate the SG amount and not just the wage amount (ordinary times earnings) when superannuation was calculated. This means that employees who have been paid overtime and superannuation is not paid on at the time now has to be included as part of the calculation and therefore another expense to the business.
The Superannuation calculation isn’t just based on ordinary time earnings, it ends up being base on total gross wages. This could end up resulting in another unexpected detrimental penalty if your business if it only pays superannuation on ordinary times earnings, all a consequence from paying superannuation obligation late.
The message from the ATO is clear to all business owners, ensure that you pay your superannuation obligation by the due date otherwise face the consequence of severe penalties and administration charges.
Get in touch with the team at Shakespeare on 9321 2111 if you would like to discuss how this may apply to your individual circumstances.
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