Superannuation Guarantee: What Employers Need to Know

Missed or late super payments are a top ATO concern, especially with the super guarantee rising to 12% from July 2025.

Background

The Australian Taxation Office is closely monitoring employer compliance with the Superannuation Guarantee. Employers must ensure contributions are made on time and lodged correctly, allowing sufficient time for payments to clear and be processed by the selected clearing house. Timing is generally determined when received by the fund, not the clearing house.

SGC Calculation

The Super Guarantee Charge (SGC) is calculated as follows:

SGC = SG Shortfall + Nominal Interest + Administration Fee

Where:

• SG Shortfall: The total SG contributions not paid on time, calculated on the employee’s total salary and wages (not just ordinary time earnings), as per section 19 SGAA.
• Nominal Interest: 10% per annum on the SG shortfall, calculated from the start of the relevant quarter until the SGC is paid (section 31(1)(b) SGAA).
• Administration Fee: $20 per employee per quarter (section 31(1)(c) SGAA).

Inability to Object to SGC Amount

Employers cannot object to the SGC amount except on grounds of mathematical or calculation errors. The law strictly imposes the SGC if SG contributions are not paid by the due date and there is no discretion to reduce the charge based on hardship or other circumstances.

Obligation to Lodge an SGC Statement

Employers who fail to pay SG contributions for an employee by the quarterly due date are legally required to lodge an SGC statement with the Australian Taxation Office (ATO).

• The SGC statement must be lodged by the 28th day of the month following the end of each quarter in which there is an SG shortfall.
• Failure to lodge the statement by the due date can result in significant penalties, including the Part 7 penalty of up to 200% of the SGC amount.
• Nominal interest is calculated at 10% per annum on the SG shortfall, from the start of the relevant quarter up to the date the SGC statement is lodged, not the date the SGC is actually paid. This means that even if the outstanding SGC is paid after the statement is lodged, interest does not accrue beyond the date of lodgement.

Example: If an employer is late paying SG contributions for the July–September quarter and lodges the SGC statement on 15 December, nominal interest is calculated from 1 July to 15 December, regardless of when the SGC is actually paid after lodgement.

Practical Implications

• Lodging the SGC statement promptly after a shortfall will reduce the interest component of the SGC.
• Delaying lodgement, even if payment is made, will result in higher interest charges.
• Payments without a proper SGC statement may not be accepted by the ATO.

How Late SG Payments Are Treated

• Not a Substitute for SGC: If SG contributions are paid after the quarterly due date, they do not count as SG contributions for that quarter. Instead, the employer is liable for the Superannuation Guarantee Charge (SGC), which includes the shortfall (calculated on total salary and wages), nominal interest, and an administration fee.
• No Tax Deduction: Late payments are not tax-deductible, even if eventually paid to the super fund.
• Reporting Requirement: The employer must lodge an SGC statement and pay the SGC, regardless of late payment.

Credits for Late Payments

• Credit Mechanism: If an employer makes a late SG payment directly to an employee’s fund (after the due date but before the SGC statement is lodged), this payment can be used to reduce the SGC liability for that quarter. The payment is called a “late payment offset.”
• How It Works: The late payment offset allows the employer to offset the SGC payable to the extent of the late payment, reducing the amount payable to the ATO. However, the employer must still pay nominal interest and the administration fee on the shortfall.
• Conditions: The offset is only available if the late payment is made before the SGC assessment is raised and is properly allocated to the relevant employee’s super fund.

Applying Credits to Later Quarters

• If an employer pays more than the required SG amount for a quarter (including late payments), any excess cannot be carried forward or credited against future SG obligations. Each quarter is assessed separately.
• Overpayments remain in the employee’s fund and cannot be used to offset SG obligations for later periods.

Refunds for Employees Who Have Left

• SG or SGC payments cannot be refunded to the employer, even if the employee has left.
• If a payment was made in error, the super fund may return it, subject to fund rules.

ATO Remission Process (PS LA 2021/3)

1. Consider remission for attempts to comply with their obligations through late payment.
2. Consider remission for attempts to comply with their obligations by lodging an SG statement.
3. Consider any increase or reduction in penalty based on the employer’s compliance history.
4. Consider other mitigating circumstances that warrant further remission.

Why Penalties Are Levied

• Ensure there are appropriate consequences for employers for failing to pay super contributions for their employees correctly and on time.
• Change the decision-making behaviour of employers to ensure that employee SG entitlements are not put at risk of delay, compromise or loss.
• Encourage employers who fail to pay super on time to take corrective action and lodge SG statements by their due dates.

Key Takeaways

• Automate and lodge SG payments on time to minimise risk.
• Late payments trigger SGC, interest, and admin fees, with no tax deduction.
• Remission is possible, but early compliance is the safest approach.

Conclusion

With SG rising to 12%, timely contributions and accurate SGC reporting are more critical than ever. Employers should act proactively to avoid penalties, protect employee entitlements, and maintain compliance.

For guidance on SG obligations and SGC management, contact Vale Legal.