A fact sheet has been released by the ATO (Australian Taxation Office) in relation to employer superannuation guarantee obligations explaining its compliance and penalty approach, which was set out in the Superannuation Guarantee (Administration) Act 1992 (SGA Act).
The ATO explained that this approach will apply to employers who are unwilling or unable to meet their superannuation guarantee obligations, including late payment, under-payment or non-payment of SG contributions to eligible employees.
Employers are required to pay super to any eligible employee who earns $450 or more (before tax) in a calendar month. The super guarantee contribution, which must be paid to a complying super fund or retirement savings account, is currently 9.5% of an employee’s ordinary time earnings and is the minimum amount of super that must be paid.
ATO stated that irrespective of the following, SG must still be paid:
- Employee is full time, part-time or casual
- Employee receives a super pension or annuity while still working, including those who qualify for the transition-to-retirement measure
- Employee is a temporary resident – they can claim the payments made through a departing Australia Superannuation payment once they leave Australia
- Employee is a company director
- Employee is a family member working in the employer’s business- provided they are eligible for superannuation guarantee
In addition, the ATO added that contractors that are paid mainly for their labour are employees for SG purposes, even if the contractor quotes an Australian Business Number (ABN). Super contributions for these contractors must be made by employers if they are paid:
- Under a written or verbal contract that is principally or wholly for their labour
- For their personal labour and skills, which may include physical labour and mental or artistic effort
- To do the contract work personally
If employers do not pay the minimum amount of SG by the due date for an employee, they would be liable for the super guarantee charge (SGC), which comprises of:
- SG shortfall amounts that are calculated on an employee’s wages or salary
- interest (currently 10%) on those amounts and
- an administration fee (currently $20 per employee, per quarter).
SGC is not a deductible expense.
Additional penalties and charges may include the following:
- The Part 7 penalty which maybe up to 200% of the amount of the charge payable.
- General interest Charge (GIC) which is calculated on a daily compounding basis and is tax-deductible in the year it is incurred
- Administrative penalty with a base penalty that can be up to 75% of the shortfall and may vary according to employer’s circumstances
- Penalty units will be imposed in addition to an administrative penalty if the employer fails to keep adequate records, fails to pass on eligible employees TFN to their super/RSA, or enter into arrangements.
- A choice liability if employer does not give an eligible employee a choice of super funds.
Moreover, a company director who fails to meet SGC liability in full by the due date becomes personally liable for the penalty which is equivalent to the unpaid amount. The fact sheet provides compliance examples and the type of behaviour that will attract closer scrutiny from the ATO and mitigating factors that may be taken into consideration in determining the level and type of penalties that will be imposed.