When it comes to the ATO, there sure are a lot of acronyms involved!
Especially when you dive into the realm of superannuation.
SG, SGC, STP. It can feel a bit overwhelming.
But, superannuation is an important part of securing your employees’ futures, it isn’t something you want to get wrong.
So, today, we are explaining the Super Guarantee Charge – what it is, how to meet your obligations if it is incurred, and how to make your super that little bit easier to manage.
Let’s get into it.
What Is The Super Guarantee Charge?
In Australia, employers are obligated to pay superannuation. This is money that is paid for your employees to provide for their retirement. It is important to understand your employer obligations in this area. You will likely need to pay super contributions to your employees regardless of whether they are full-time, part-time or casual workers.
All employees are covered by the superannuation guarantee (SG) which states the minimum amount of super you must pay to their nominated super fund. The SG is currently 11% of an employee’s base earnings. If your organisation does not pay the full SG amount by the quarterly super due dates, then you will incur a super guarantee charge (SGC).
The SGC will end up costing more than the super your business would otherwise have paid. That is because it is calculated based on salary and wages (which includes overtime and some allowances) along with interest costs and additional fees.
How To Meet Your SGC Obligations
SGC becomes payable if you don’t pay an employee’s SG amount in full, on time and to the right fund. If you are required to pay the SGC then you will need to lodge an SGC statement and pay the amount to the ATO, not your employee’s super fund.
SGC Statements
SGC statements will need to be lodged with the ATO if you do not meet your super obligations on time. These statements need to be lodged within one calendar month of the missed payment date. Here is the table from the ATO website to help you establish timeframes:
Statements need to be lodged through ATO’s online portal regardless of whether you have since paid the outstanding super or not. They should be lodged on time or you can incur an additional penalty charge. This penalty is known as the part 7 penalty and can be up to 200% of the SGC.
So, it’s really important that you don’t miss these lodgement dates!
Payment To ATO
The SGC should not be paid to your employee’s super fund, rather it should be paid to the ATO. The SGC statements will help you calculate the amount payable. The SGC is comprised of three components:
- SG Shortfall: The super contributions that would have been paid to your employee based on their actual salary and wages as opposed to their ordinary time earnings.
- Nominal Interest: calculated at 10% per annum, the charge accrues from the start of the relevant quarter
- Administration Fee: $20 per employee, per quarter
If you have trouble meeting the payment dates, the ATO may be able to offer payment plan options. Contact us for help arranging this.
Getting It Done
You can lodge your SGC statement through the Online Forms section of ATO’s Online Services for business, or your tax agent can submit this for you. When you log in, the SGC calculator will ask a series of questions to determine whether you need to pay SGC for any of your employees and how much you need to pay.
You can complete the statement online and lodge it electronically. You will then be able to use the SGC payment reference number (PRN) to pay the amount due.
Making It Easy With Single Touch Payroll
Single Touch Payroll (STP) streamlines the payroll reporting you need to submit to the ATO. It does this by transmitting your employee’s payroll info directly to the ATO every time you pay them through your STP-enabled software.
When you use STP, all of your payroll information is reported, including salary and wages, PAYG withholding and superannuation contributions. Using this automated reporting reduces your admin burden as you don’t have to submit the information manually, minimising the risk of error.
It also means you have better visibility of your payroll records and superannuation contributions. You can easily track what has been paid to ensure you are complying with the mandatory contribution requirements and reduce the chance of having to pay an SGC.
Meeting Your Obligations With Ease
As an employer, it is your obligation to pay your employees accurately and on time. That includes their superannuation contributions. Many businesses choose to utilise the expertise of an accounting firm to help them in this area.
These are just a few of the reasons why:
- Compliance: Accounting firms like Cadenze have entire teams that specialise in payroll and superannuation, meaning you get access to their expertise in the complex rules and regulations governing these areas. They can ensure your business remains compliant and meets all of the necessary super obligations.
- Efficiency: Having access to a proficient payroll team helps to streamline your processes, automate your calculations and handle your ATO reporting efficiently. It allows you to focus on your core business tasks, knowing your super obligations are still being met.
- Accuracy: Payroll and superannuation tend to involve intricate calculations and reporting. Your accountant will have the expertise in these domains to minimise errors, ensuring that employee payments, tax withholdings, and superannuation contributions are accurate and reported correctly to the ATO.
- On Time Lodgment and Payments: It is vital that reporting is lodged and that payments are made by the required due dates, otherwise, you may face additional penalties and interest fees. Your accountant can help you avoid that by ensuring your business meets the necessary deadlines set out by the ATO.
Hitting The Due Dates
To remain compliant with superannuation regulations it is imperative that you pay attention to the due dates set out by the ATO. This will help you to lodge and pay SG on time and avoid the need for an SGC. However, if you have incurred an SGC, it is even more important that you meet those deadlines to avoid further penalties.
The most recent SG quarter closed on 31 December 2023, SG lodgement and payments are due by 28 January 2024. If you are not able to meet those deadlines, then you will need to ensure you lodge and pay your SGC by 28 February 2024.
If you are unsure how to make that happen, then reach out to the expert team at Cadenze today and we will be able to support and guide you through the process.
Payday superannuation
On 2 May 2023 the Australian Government announced that from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages. While not necessary to pay super in line with salary and wages yet, it is important to be aware of the upcoming change and plan ahead. We will advise you further as these changes occur.