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  • Module 6: Rectifying late payments

    This module provides you with the tools and information you need to rectify late payments. It covers:

    Check what you've learned in:

    Super guarantee charge and statement

    Employers who do not pay the right amount of super contributions to a complying super fund by the due date are required by law to lodge a Superannuation guarantee charge statement and are liable for the super guarantee charge.

    The super guarantee charge is non-deductible against your business income. It has three components:

    • super guarantee shortfall amounts (including any choice liability) calculated on your employee’s salary or wages (not ordinary time earnings)
    • nominal interest on those amounts (currently 10%)
    • an administration fee ($20 per employee, per quarter).

    To report and rectify the missed payment, lodge a Superannuation guarantee charge statement and pay the super guarantee charge to the ATO by the due date (see below).

    Take a few minutes to view the Superannuation guarantee charge statement (PDF 239KB)This link will download a file .

    Due dates for super guarantee charge and statement

    As you already know, super guarantee payments are due on specific dates for each quarter (as explained in Module 5).

    The due date for payment of the super guarantee charge and lodging the statement is one calendar month after the super guarantee due date, as shown in the table below.

    Due dates by quarter

    Quarter

    Period

    Super guarantee payment due date

    Super guarantee charge and statement due date

    1

    1 July – 30 September

    28 October

    28 November

    2

    1 October – 31 December

    28 January

    28 February

    3

    1 January – 31 March

    28 April

    28 May

    4

    1 April – 30 June

    28 July

    28August

    Note: When a due date for payment falls on a weekend or public holiday, you can lodge and make the payment on the next working day.

    Example: Working out due dates for the super guarantee charge and statement – quarter 1

    For quarter 1 (1 July to 30 September), super guarantee contributions are to be paid to a complying super fund by 28 October.

    If you miss paying your super guarantee to a complying super fund by 28 October, you have until 28 November (one calendar month later) to pay the super guarantee charge and lodge the Superannuation guarantee charge statement with us.

    End of example

    Calculating the super guarantee charge

    To complete the Super guarantee charge statement, you must work out the super guarantee charge.

    The easiest option is to use the Super guarantee charge statement and calculator tool, and we'll look at that later in this module. For now, we'll work it out manually.

    The super guarantee charge is calculated as:

    Super guarantee shortfall + nominal interest + administration fee.

    Let’s explore each of these components and then look at the final calculation:

    Calculating the super guarantee shortfall

    Remember, the super guarantee shortfall is calculated using salary and wages, not ordinary time earnings. The calculation is:

    Salary and wages × 9.5%.

    Example: Calculating the super guarantee shortfall

    Imogen is an employer with 30 employees.

    During quarter 4 of the financial year (1 April to 30 June 2017), each employee earned $12,000 in salary and wages (including $2,000 in overtime).

    Imogen calculates her super guarantee shortfall in two steps, as follows:

    1. Salary and wages (for 30 employees) = $12,000 × 30 = $360,000
    2. Super guarantee shortfall = salary and wages × 9.5%

    = $360,000 × 9.5%

    = $34,200

    End of example

    Calculating the nominal interest

    Nominal interest is calculated from the first day of the quarter that the super guarantee was not paid. The calculation is:

    Super guarantee shortfall divided by
    days in the year × days super guarantee unpaid × 10%.

    Example: Calculating nominal interest

    Continuing with the example of Imogen – to work out how many days her super guarantee was not paid for quarter 4, Imogen counts the number of days from 1 April, until the statement is lodged, which was 17 August. This is 139 days.

    Therefore, her nominal interest is calculated:

    Super guarantee shortfall ÷ 365 days (1 year) × 139 days × 10%

    = $34,200 ÷ 365 × 139 days × 10%

    = $1,302

    End of example

    Calculating the administration fee

    The administration fee is calculated as follows:

    Number of employees × $20.

    Example: Calculating the administration charge

    Imogen calculates her administration fee for quarter 4:

    Number of employees × $20

    = 30 employees × $20

    = $600

    End of example

    Super guarantee charge

    The super guarantee charge is calculated by adding the three amounts together, as follows:

    Super guarantee shortfall + nominal interest + administration fee.

    Example: Calculating the super guarantee charge

    Imogen's super guarantee charge for quarter 4 is:

    Super guarantee shortfall + nominal interest + administration fee

    = $34,200 + $1,302 + $600

    = $36,102

    End of example

    Benefits of paying super guarantee on time

    It is easy to see the benefits of paying the super guarantee on time by revisiting the example of Imogen.

    Example 1: Paying super guarantee on time and to the correct funds

    During quarter 4 of the financial year (1 April to 30 June 2017), each of Imogen's employees earned $12,000 in salary and wages.

    For each employee, $2,000 of their total salary and wages was paid for overtime. As overtime does not form part of ordinary time earnings, each employee’s ordinary time earnings for the quarter were $10,000.

    For quarter 4, Imogen pays super guarantee on the ordinary time earnings of all employees, calculated as follows:

    The total ordinary time earnings for her 30 employees is $300,000.

    Super guarantee for the quarter (ordinary time earnings × 9.5%)

    = $300,000 × 9.5%

    = $28,500.

    Imogen pays the $28,500 on time (by 28 July) into the complying super fund accounts for her employees. The $28,500 is tax deductible for the business.

    End of example

      

    Example 2: Super guarantee not paid on time

    For quarter 4 (1 April to 30 June 2017), the super guarantee due date is 28 July.

    However, in this example, Imogen does not pay it on time. On 17 August, she realises she hasn't paid the super guarantee (two weeks after the due date).

    She decides to lodge the Super guarantee charge statement and pay the super guarantee charge that same day.

    Imogen phones the ATO to notify us of her error and explains what she'll do to rectify the late payment.

    As she hasn't paid the super guarantee on time, she must lodge a Super guarantee charge statement showing the amount of super guarantee charge she has to pay. Imogen must send the Super guarantee charge statement to us by 28 August to avoid an additional super guarantee charge – known as the Part 7 penalty. This extra charge is explained further in Module 7.

    End of example

    If we compare:

    • example 1 – super guarantee paid on time = $28,500
    • example 2 – super guarantee charge for late payment = $36,102.

    The charge adds an extra $7,602.

    The super guarantee charge is paid to the ATO and is then distributed to the employees’ complying super funds minus the administration fee.

    Additionally, if you consider the deductibility of on-time payments and the non-deductibility of super guarantee charge, the extra cost of late payment can be significant.

    Late payment

    In Example 2 (above) you have calculated the super guarantee charge. At this stage you have a couple of decisions to make. You can:

    Use the late payment offset

    You can pay the super guarantee directly to each employee’s fund. In doing this, you can choose to offset this ‘late payment’ against the full super guarantee charge. This means you will pay the ATO the administration fee.

    Example: Using the late payment offset

    Going back to the example of Imogen – she subtracts the administration fee from the super guarantee charge, as follows:

    $36,102 minus $600 = $35,502

    Imogen pays the super guarantee of $35,502 distributed directly to her employees' funds.

    She pays the $600 administration fee to the ATO.

    End of example

    If you decide to use the late payment offset, you need to complete question 19 in the Super guarantee charge statement. This notifies us that you are electing to offset the late payment against the super guarantee charge.

    In making this decision, the late payment:

    • is not tax-deductible
    • can't be used as a prepayment for current or future super contributions
    • can't subsequently be changed by you to offset an amount or revoke your election.

    If you've already lodged a Super guarantee charge statement or received a super guarantee charge assessment for a quarter that you want to claim an offset for, you need to lodge a Superannuation guarantee late payment offset election (PDF 445KB)This link will download a file.

    There are some rules for electing the late payment offset. You'll generally be able to offset late payment amounts against the super guarantee charge if you:

    • made the payment to your employee's super fund
    • made the payment before the date your super guarantee charge assessment was made (this means your original assessment, not any subsequent amended assessments)
    • lodge your late payment offset election with us within four years of your original super guarantee charge assessment date.

    Carry the late payment forward

    You can elect to ‘carry forward’ your late payment and apply it to a future quarter.

    If you decide to do this, advise us that you're not going to apply the late payment offset by ticking ‘no’ at question 19 in the Superannuation guarantee charge statement (PDF 239KB)This link will download a file. This notifies us that you're electing to carry forward the payment.

    You still have to pay the full super guarantee charge for the outstanding quarter with interest, but in carrying forward the payment against a future quarter, you can claim that carry forward payment as a tax deduction.

    You can carry forward a late payment only if:

    • it's for the same employee
    • the start of the quarter to which you’re carrying forward the payment is within 12 months of the actual payment date.

    There are a number of variables to consider to ensure this decision is beneficial. For example, if you're not making an income from your business there will be nothing to apply the tax deduction to. In this case, it might be more beneficial to use the late payment offset to reduce your interest charge.

    There are many things to consider with both decisions. Talk to your tax adviser to determine the best outcome for your situation.

    Completing the super guarantee charge statement

    As discussed already, the Superannuation guarantee charge statement records the super guarantee charge calculations and your decisions on how you want to apply your late payment offset.

    To help you calculate each section in the Superannuation guarantee charge statement in detail, you can use the Employee calculation worksheet.

    Take a few minutes to explore the Employee calculation worksheet (PDF 181KB)This link will download a file.

    Choice liability

    The Superannuation guarantee charge statement also records the amount of choice liability you may need to pay.

    The choice liability is recorded at question 17 in the Superannuation guarantee charge statement (PDF 239KB)This link will download a file.

    The choice liability is the penalty for not giving eligible employees a choice of super fund. You pay it if you:

    • haven't given them a Standard choice form within the required timeframe
    • have paid their super to a complying super fund but not the fund they chose
    • charge them a fee for implementing their choice of fund.

    If you don’t give an eligible employee a choice of fund form, this will result in the payments going to the employer-nominated fund instead of the employee’s super fund.

    If you provide an employee with a choice form and they don't elect a super fund in a timely fashion (resulting in their super guarantee payments going to the default super fund), this doesn’t incur a choice liability.

    Choice liability is calculated as follows:

    Super guarantee shortfall paid to the wrong fund × 25%.

    The liability is capped at $500 per employee, per quarter.

    When completing the Superannuation guarantee charge statement you must record the amount of choice liability to be paid, as it forms part of the super guarantee charge.

    • If there is no choice liability, simply record zero against question 17.
    • If there is a choice liability, you must calculate the liability and record it in question 17.

    Using the super guarantee charge calculator tools

    In the sections above, we have manually calculated the super guarantee charge including the choice liability and discussed how to complete the Superannuation guarantee charge statement.

    The Super guarantee charge statement calculator calculates the super guarantee charge, inclusive of choice liability, for you and prepares the Super guarantee charge statement.

    The Super guarantee charge calculator is available through the Business Portal and Tax Agent Portal.

    If you don't have access to those portals, you can use the calculator on our website; however, on completion, you will need to print and post the Super guarantee charge statement to the ATO. Take a few minutes to explore the Super guarantee charge statement calculatorThis link opens in a new window.

    Check your understanding

    Work through the example below to check your understanding of the topics in this module.

    Example: Rectifying late payments

    You are the director of a not-for-profit organisation, Kids Can Do, and one of the staff advises you that their super guarantee contribution has not been paid for the quarter ended 30 June 2018.

    The error occurred as the bookkeeper quit suddenly and nobody was able to gain access to the books for a couple of weeks.

    On 17 August 2018, you get access to the books. You realise that super contributions for salary and wages, totalling $40,000 for the quarter, have not been paid before the due date of 28 July 2018. All salary and wage payments meet the definition of ordinary time earnings.

    This affected the twelve staff employed by Kids Can Do.

    You quickly arrange for $3,800 to be paid to the employee's super funds (almost three weeks late). You contact us to let us know what has happened.

    Try the following questions. What would your answers be?

    Question 1: When must you lodge a Superannuation guarantee charge (SGC) statement?

    A. Before 28 August 2018

    B. Before 30 October 2018

    Question 2: Which calculation do you use to work out the super guarantee charge?

    A. super guarantee shortfall + nominal interest + administration fee

    B. ordinary time earnings + nominal interest + administration fee

    Question 3: What is the super guarantee shortfall amount?

    A. $3,960

    B. $3,800

    Question 4: What is the nominal interest payable?

    A. $390

    B. $145

    Question 5: What is the administration fee payable?

    A. $220

    B. $240

    Question 6: What is the super guarantee charge amount?

    A. $4,185

    B. $4,880

    Question 7: You have calculated the super guarantee charge. What should you do now?

    A. Decide whether to apply the late payment offset or elect to carry the late payment forward to apply against a future quarter.

    B. Consider that if you apply the late payment offset it is not deductible against your business income.

    C. Consider that if you elect to carry the late payment forward against a future quarter it will be deductible against your business income.

    D. All of the above.

    The answers are provided below.

    End of example

    Answers

    Question 1: A is correct. You are required to lodge an SGC statement before 28 August 2018. This is because Kids Can Do had a super guarantee shortfall for the quarter and did not pay by the due date (28 July 2018).

    Question 2: A is correct. The super guarantee charge is calculated as super guarantee shortfall + nominal interest + administration fee.

    Question 3: B is correct. The SGC shortfall is calculated as: Salary and wages × 9.5% = $40,000 × 9.5% = $3,800.

    Question 4: B is correct. The nominal interest is calculated as: 139 days at 10% per annum. SGC shortfall ÷ 365 days × 139 days × 10% = $145.

    Question 5: B is correct. The administration fee is calculated as: Number of employees × $20 = 12 × $20 = $240.

    Question 6: A is correct. The super guarantee charge = super guarantee shortfall + nominal interest + administration fee = $3,800 + $145 + $240 = $4,185.

    Question 7: D is correct. You should do all of the above and consider seeking advice from a tax advisor.

    Summary of Module 6

    Remember, when rectifying late payments:

    • lodge your Superannuation guarantee charge statement by the due date.
    • calculate the super guarantee shortfall using salary and wages.
    • calculate the nominal interest from the first day of the quarter that is due for payment.
    • there is an administration fee of $20 per employee, per quarter for processing the super guarantee charge statement.
    • contact us as soon as you realise there will be a delay in payment.
    • use the Super guarantee charge statement calculator tool to save time and effort.
      Last modified: 09 Apr 2019QC 58510