As a business owner, there are multiple ways you are wasting money by not paying superannuation on time. Before we get into it, we’ll first go over a few details regarding super.
The current super guarantee rate, that is, the rate that you must pay employees, is 10.5% of ordinary earnings. In previous years, there was $450 minimum monthly earnings before super had to be paid. However, as of 1 July 2022, this minimum monthly earnings amount has been removed. Please note there are still different rules in place for employees under 18 years of age. For more information, visit the ATO website.
In general, as a minimum, super must be paid quarterly, although you can choose to pay more regularly. For cash flow purposes, sometimes it can be better to pay monthly, or even fortnightly or weekly! The periods and super due dates are as follows:
Quarter | Period | Payment Due Date |
1 | 1 July - 30 September | 28 October |
2 | 1 October - 31 December | 28 January |
3 | 1 January - 31 March | 28 April |
4 | 1 April - 30 June | 28 July |
These are the due dates as published by the Australian Taxation Office (ATO), however, some super funds, awards and contracts require you to pay super more regularly than quarterly so make sure you are aware of your obligations!
So, how are you wasting your money by not paying super by the due date? There are various ways, the main ones being:
Unable to claim your super expense as a tax deduction (non-deductible)
Incurring the super guarantee charge
Other fines and penalties
Unable to Claim your Super Expense
Super that is paid late is not a deductible expense for tax purposes. The following example will be used to illustrate what this means:
Total Income | $250,000 |
Total Expenses (incl. super expense of $20,000 paid late) | $150,000 |
Profit (income less expenses) before tax | $100,000 |
If super was paid on time, you would only have to pay tax on the profit of $100,000. However, as super was paid late, the super expense is not tax deductible and gets added back to the profit. That means that your taxable profit becomes $120,000 instead of $100,000, and you will pay tax on $120,000 instead of on $100,000.
Had super been paid on time, using the 2022-2023 tax rates, you would have had to pay $22,967 tax. However, as it was paid late, you would have to pay $29,467 tax. Therefore, if super had been paid on time, you could have saved yourself $6,500 in tax ($29,467 less $22,967). However, that’s not the only savings you will receive, as you will see by reading on about the super guarantee charge.
Incurring the Super Guarantee Charge
Another way you are wasting your money by not paying super on time is that technically you are required to lodge a super guarantee charge (SGC) form, and will incur the SGC. The SGC is made up of the super guarantee shortfall (made up of super calculated on salary and wages and any choice liability, based on the shortfall and capped at $500), nominal interest of 10% per annum which accrues from the start of the relevant quarter, and an administration fee of $20 per employee per quarter.
As an example, if your employee accrues $20,000 worth of super in a quarter, and you don’t pay it until the day after it is due, you will have to pay up to $21,356.83 instead of $20,000. That’s $1,356.83 that could have been saved if you had paid it one day earlier!
If you pay it three months after it was due, you will have to pay up to $21,699.45 instead of $20,000, which is $1,699.45 that could have been saved.
If you can’t or haven’t paid super on time, you have to complete an SGC form which is due one calendar month after the due date for the super payment. If the SGC forms aren’t completed on time, you can accrue other fines and penalties.
Other Fines and Penalties
If you don’t meet your super obligations, you may have to pay additional penalties on top of the SGC for a variety of reasons including:
Failing to provide an SGC statement when required
Administrative penalty
Avoiding your super obligations through arrangements
Director penalties
General interest charges
Choice shortfall
Failing to keep adequate records
Failing to provide employee’s TFN to the super fund
These penalties range in value, but can be up to 200% of the SGC. For more information on these penalties, visit the ATO website.
