In September 2018 the government extended an olive branch to employers in the form of a Super Guarantee Charge amnesty. At that time many business owners took the opportunity to bring late or unpaid employee super guarantee payments up to date. For businesses that may have fallen behind since (even unintentionally), it’s now a very different story and you can expect no sympathy from the ATO.
Late or no payments will be met with no tax deduction, interest charges and administration fees and you could endure a hefty penalty that could be as much as 200% in the worst-case scenario. Here’s what you need to know if you pay your employee super late or don’t pay at all.
If you have a business that usually meets its commitments on time, but you’ve found that there’s been a late super guarantee payment, there are typically two reasons you should look into it immediately.
The first is your in-house system. Your unintentional late payment may be due to human or system error. However, if you use a clearing house, despite paying your super guarantee with time to spare, the clearing house may pay it late on your behalf. This is unlikely for businesses that use the ATO’s own clearing house (available for businesses with up to 19 employees), but for larger employers who use other clearing houses, it is cause for investigation.
Either way, late payments are not tolerated by the ATO and they make no apologies for protecting employees’ entitlements.
Even one day late will make little difference to the ATO, as you can expect the tax deduction you would normally have received on your super payment to be voided.
Rubbing further salt into the wound, where superannuation is paid late, businesses will have to pay super on ordinary time earnings AND any other earnings such as any overtime or bonuses paid to employees. If the superannuation was paid on time, only ordinary times earnings is subject to superannuation guarantee.
You’ll also be hit with interest charges somewhere in the vicinity of 8% to 10% which will be applied for the time your employees’ super remains unpaid. Then there are the administrative charges. You can expect a $20 fee for every employee who has been paid late. All of these costs are non-deductible to the business.
For employers who pay late, accidentally or intentionally, the requirement to complete the Superannuation Guarantee Charge form within one month of the due date, puts them on the ATO’s audit radar.
And to complete the pile-on, for employers who consistently pay late or who fail to pay at all and don’t complete the notification form, the ATO can apply significant penalties that are on average around 40%, but can be as much as 200%, of the amount of employee superannuation owing.
Ongoing non-payment can also become personal for company directors as the ATO can apply the Director Penalty Notice (DPN) regime to make them personally liable if their business fails to pay on time or lodge the appropriate form.
Super can be complex, especially for mining and resources companies that employ a mix of employees and contractors.
It is not uncommon for employers to believe their contractors are not entitled to superannuation support from them, but depending on the nature of their engagement with the business, along with how the contractor is structured, it is highly plausible that they may become entitled to receive superannuation payments on their behalf. Non-payment of super in such cases, particularly for long term contractors, could be significant, and so too, the penalties.
For well-intentioned businesses, that find themselves regularly paying their employees’ superannuation late, the bells should be going off. This is because well managed and financially sound businesses, usually don’t muck up their employee super obligations on a regular basis.
An inability to meet payments as they fall due usually means there’s a problem that could be cashflow related or perhaps something more sinister, and action needs to be taken quickly before a bad situation gets worse.
Your next steps:
If you have reviewed your past superannuation payments and found they’ve been made late, or otherwise received an unexpected notification that your Super Guarantee Charge has been paid late, review your internal systems to check when the payment was lodged by your in-house team.
If you use a super clearing house, check your lodgement arrangements including when super needs to be received by them for payment.
If you have paid late, ensure you complete and lodge the Super Guarantee Charge form within one month of the due date.
If you are unable to make current and future Super Guarantee payments, you will be well advised to conduct a financial management review to identify cashflow and solvency issues at your earliest.
Similarly, if you suspect fraudulent activity, immediately take steps to implement an audit.
For further information and specialised advice relating to tax and business matters often unique to the mining and resources sector, please contact Craig Barry on +61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au.
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting and business advisory services for executives, professionals and business owners in the mining and resources sectors.
