Welcome to the world of superannuation, where understanding and complying with super obligations as a business owner is crucial.
Superannuation plays a vital role in Australia’s retirement savings system, ensuring that employees receive a certain amount of income in their retirement years. As an employer, it is your responsibility to understand and comply with superannuation obligations. To help with this, we have put together some key points to make it easier for you to keep up to date with your obligations
Understanding Super Obligations
Superannuation (or super) is a compulsory retirement savings system in Australia. To comply with super obligations, employers must make regular contributions to an authorised superannuation fund on behalf of their employees.
The compulsory superannuation rate is currently 11% of an employee’s ordinary time earnings. It will increase by 0.5% on 1 July in 2024 and 2025 until it reaches 12%. This rate may vary in the future as determined by the government.
It is essential for businesses to understand and comply with their super obligations to avoid penalties and ensure the financial well-being of their employees.
Consequences of Late Super Payments
Late payment of super – even by one day – can have significant consequences. Not only will you lose your tax deduction for the late payment, but you may also face penalties and additional obligations.
The penalties for late super payments include the requirement to lodge a Superannuation Guarantee Charge (SGC) statement with the Australian Taxation Office (ATO). The ATO can levy interest and administrative penalties of up to 200% of the late payment. Importantly, none of these penalties are tax deductible.
To avoid these penalties, it’s crucial that each employee’s super fund receives its contribution by the 28th day after the end of the quarter (if you are required to pay quarterly). It is advisable not to leave the payments until the last day, as processing times may cause delays. We recommend payments be made by the 18th day of the processing month.
Important Dates for Super Payments
To help you plan your payments, here is an outline of the key dates:
Quarter 1: July – 30 September
– Contribution to be received by Superfund: 28th October
– Recommended payments processed by: 18th October
Quarter 2 : 1 October – 31 December
– Contribution to be received by Superfund: 28th January
– Recommended payments processed by: 18th January
Quarter 3: 1 January – 30 March
– Contribution to be received by Superfund: 28th April
– Recommended payments processed by: 18th April
Quarter 4: 1 April – 30 June
– Contribution to be received by Superfund: 28th July
– Recommended payments processed by: 18th July
More info can be found here.
Super Obligations for Employers
If you have a business and pay employees, it is essential to be aware of your super obligations. This includes not only employees but also working directors, shareholders, and related parties. Additionally, if you hire subcontractors, there may be additional super obligations to fulfill.
To meet these obligations, it is necessary to report through SuperStream. Introduced in 2016, SuperStream is a system designed to ensure the accurate and timely processing of super payments. Compliance with SuperStream, along with Single Touch Payroll (STP), is crucial for avoiding penalties and ensuring that you meet your super obligations.
Consequences of Non-Compliance
If you are audited and found to be non-compliant with your super obligations, the ATO may scrutinise your entire super payment history, potentially going back several years. They may disallow additional tax deductions and impose penalties.
Being late or non-compliant with super payments once or twice can have painful consequences. However, consistent non-compliance can have severe and even fatal consequences for a business.
Company Directors can be personally liable for employees’ unpaid super. If super payments are late and an SGC statement is not lodged by the due date, the directors will be held liable. The only way for the director to avoid liability and further action is to ensure the debt is paid.
In 2018, legislation was amended to give the ATO the option to pursue criminal charges for breaches of employer superannuation guarantee obligations in specific circumstances. This means that directors or individual employers could potentially face jail time for non-compliance.
Our Role as Tax Agents
As tax agents, we are bound by the Tax Practitioners’ Board Code of Conduct. We have a responsibility to take reasonable care in applying taxation laws correctly and ensuring the accuracy of the documents we prepare and lodge on behalf of our clients.
Due to recent audit activity by the ATO and the Tax Practitioners’ Board, we are required to be diligent in detecting non-compliance with super obligations when preparing clients’ tax returns. Just as we cannot knowingly claim a tax deduction for non-deductible expenses, claiming a deduction for late super payments is prohibited.
At Scope Accounting, we prioritise the financial well-being of our clients by providing assistance and guidance in meeting their super obligations. Not only does this help avoid penalties, but it also upholds our commitment to maintaining professional integrity.
Contact us now, and let’s work together to make sure everything is in order!
