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Navigating the Maze of Superannuation Guarantee Charge

With an increase in ATO data matching technology spotting irregularities between super payments and earned income, ABN Director Darren Hagarty explains how bookkeepers can help their clients avoid the crippling Super Guarantee Charge (SGC).

The ATO’s data matching technology is working overtime, with Australian Bookkeepers Network (ABN) members reporting a significant uptake in ATO correspondence about client super irregularities between employee earning and super paid for employers.

The Superannuation Guarantee Charge (SGC) can cripple a business

Director of Australian Bookkeepers Network (ABN), Darren Haggarty, explains the penalties are potentially dire and attention to the issue of super has never been more important.

“The costs of falling prey to the Super Guarantee Charge can be easily upwards of triple the cost of playing within the rules,” said Darren. “This is clearly something that needs to be avoided at all costs.”

“The storm has been brewing for a while now and the ATO is now throwing its weight behind correcting bad behaviour and recouping shortfalls,” said Darren.

“The SG/SGC legislation is quite rigid making it difficult for the ATO to draw a line between those businesses who are trying to do the right thing but making mistakes. Inadvertent late payment caused by factors outside the employer’s control such as Clearing House or Super Fund delays is putting employers in a tough position.

Three things need to happen to get SGC right

“When an employer has a SG obligation for an employee, they have to make sure it’s paid in full, on time, and paid to the right fund,” said Darren.

“If we don’t do any or all of those things, then the employer has to put things right and do it quickly,” said Darren. “They have to lodge and pay the superannuation guarantee charge. The longer you wait the more costly it becomes.

“First of all, you have to pay the superannuation shortfall. It is calculated on a broader notion of salary and wages. Overtime earnings come into the mix, where they otherwise wouldn’t have.

“There is an interest charge, which is 10% per annum. It’s calculated from the first day of the quarter that SCG relates to. Then for good measure there is an admin fee of $20 per employee per quarter, which starts to climb swiftly with a lot of employees.

“To make matters worse, they then have the ability to impose an additional penalty, which could be upwards of 200%. Then this is all non-tax deductible.”

Important that bookkeepers make clients aware of these penalties

For a small team of 5 people, a late payment which might have had a super liability of $7,500 in the quarter, can quickly climb close to $25,000, which could cripple the business.

“With data matching employers have to stay across this or risk their business going under, making it critical for bookkeepers to pull out all stops to ensure their clients are on top of their SG obligations.”

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