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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.

    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

    28 August

    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 Superannuation guarantee charge statement, you must work out the super guarantee charge.

    The easiest option is to use the Super guarantee charge statement spreadsheet version (XLS 522KB).This link will download a file 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. Currently the super guarantee rate is 9.5%. 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), each employee earns $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

    If you've paid some super guarantee before the quarterly payment due date and some after the due date for the quarter, you need to use the Employee calculation worksheet to correctly calculate each employee's shortfall for the quarter.

    Calculating the nominal interest

    Nominal interest is calculated from the first day of the quarter that the super guarantee was not paid up to but not including the 'lodgment day'.

    The 'lodgment day' is the later of either:

    • the 28th day of the second month following the end of the relevant quarter
    • the day you lodge the Superannuation guarantee charge statement.

    The calculation is:

    • super guarantee shortfall divided by the number of days in the year
      × number of days from the start of the quarter (up to but not including the lodgment day × 10%.

    Example: Calculating nominal interest

    Imogen works out how many days her super guarantee was not paid for in quarter 4.

    Imogen counts the number of days from 1 April, until, but not including, the day the statement is lodged, which is 17 September. This is 169 days.

    She calculates her nominal interest as:

    • Super guarantee shortfall ÷ 365 days (1 year) × 169 days × 10%

    = $34,200 ÷ 365 × 169 days × 10%

    = $1,583.

    End of example

    Note: Once you become liable to pay the super guarantee charge, to stop nominal interest accruing you must lodge the Superannuation guarantee charge statement with the ATO.

    Calculating the administration fee

    The administration fee is calculated for each quarter as follows:

    Number of employees for whom there was a shortfall × $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 + $1,583 + $600

    = $36,383.

    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), each of Imogen's employees earn $12,000 in salary and wages.

    For each employee, $2,000 of their total salary and wages is paid for overtime. As overtime does not form part of ordinary time earnings, each employee’s ordinary time earnings for the quarter are $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), the super guarantee due date is 28 July.

    However, Imogen doesn't pay it on time. On 17 September, she realises she hasn't paid the super guarantee (seven weeks after the due date).

    She decides to lodge the Superannuation 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 Imogen hasn't paid the super guarantee on time, she lodges a Superannuation guarantee charge statement showing the amount of super guarantee charge she has to pay.

    Referring back to the example 'Calculating the super guarantee charge', Imogen's super guarantee charge liability is calculated to be $36,383.

    Imogen is required to send the Superannuation guarantee charge statement to us by 28 August. As she hasn't lodged by the due date she may also be liable for 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 = $36,383.

    The charge adds an extra $7,883.

    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. You should complete and lodge the Superannuation guarantee charge statement and pay the charge to the ATO. However, if you've already made a late payment directly to your employees' funds, you may be able to:

    Use the late payment offset

    If you have a shortfall and you've paid the super guarantee and nominal interest directly to your employee’s fund, you may choose to offset this ‘late payment’ against the super guarantee charge, provided you meet certain rules. You will still be required to pay the ATO the administration fee.

    Example: Using the late payment offset

    Imogen subtracts the administration fee from the super guarantee charge, as follows:

    • $36,383 minus $600 = $35,783.

    Imogen pays the super guarantee of $35,783 (including nominal interest) directly to her employees' funds.

    She pays the $600 administration fee to the ATO.

    End of example

    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.

    If you decide to use the late payment offset, you need to complete question 19 in the Superannuation guarantee charge statement. If you're using the Super guarantee charge statement tspreadsheet version (XLS 522KB)This link will download a file you will claim the late payment offset at column G. 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
    • does not change the calculation of nominal interest.

    If you've already lodged a Superannuation 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 Super guarantee late payment offset election form.

    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. If you're using the Super guarantee charge statement spreadsheet version (XLS 522KB)This link will download a file do not include the late payment amounts at column G.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 super guarantee charge debt.

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

    Completing the superannuation 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.

    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.

    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, the payments will go to the employer-nominated fund instead of the employee’s super fund. These contributions are called 'no choice contributions'.

    An employer's individual super guarantee shortfall for an employee for a quarter is increased by the following formula, resulting in the choice liability:

    • [Shortfall amount worked out if 'no choice contributions' not made minus shortfall amount] × 25%.

    The liability is capped at $500 per employee, per notice period.

    The notice period for an employee starts on the later of either:

    • 1 July 2005
    • the day on which the employee is first employed by the employer
    • the day after the preceding notice period has ended.

    A notice period ends when you're issued with a notice of assessment which includes the choice liability.

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

    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 Superannuation guarantee charge statement.

    We have also made available a Superannuation guarantee charge statement spreadsheet version which calculates the super guarantee charge and provides for easy electronic lodgment.

    Take a few minutes to explore the Super guarantee charge statement calculatorThis link opens in a new window and the spreadsheet version (XLS 522KB)This link will download a file

    If you work out the charge amount using our calculator and choose to pay your employee's super fund directly, you will need to lodge the Superannuation guarantee charge statement with us on the same day you pay the funds, to avoid nominal interest continuing to accrue.

    Remember, to stop nominal interest accruing you must lodge the Superannuation guarantee charge statement with us once you become liable to pay the super guarantee charge.

    Lodging the superannuation guarantee charge statement

    The preferred method for you to lodge the Superannuation guarantee charge statement is electronically by completing the Superannuation guarantee charge statement spreadsheet version (XLSX 522KB)This link will download a file and following the lodgment instructions provided. The completed Superannuation Guarantee Charge Statement spreadsheet may be lodged through the Business Portal or Online services for agents.

    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. One of your staff advise you that their super guarantee contribution has not been paid for the quarter ended 30 June 2018.

    You realise 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 affects all 12 staff employed by Kids Can Do.

    You contact ATO on 17 August to let us know what has happened and complete the Superannuation guarantee charge statement.

    Try the following questions. What would your answers be?

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

    A. On or before 28 August 2018

    B. On or before 28 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 if you lodge the Superannuation guarantee charge statement on or before its due date?

    A. $390

    B. $155

    Question 5: What is the administration fee payable?

    A. $220

    B. $240

    Question 6: What is the super guarantee charge amount?

    A. $4,195

    B. $4,880

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

    A. Lodge the Superannuation guarantee charge statement and pay the super guarantee charge amount to the ATO.

    B. Pay the super guarantee shortfall and the nominal interest to your employees' super funds, lodge the Superannuation guarantee charge statement and pay the ATO the administration fee.

    C. Either A or B.

    End of example

    Answers

    Question 1: A is correct. You are required to lodge an Superannuation guarantee charge 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 - $155. Nominal interest accrues from the start of the quarter up to but not including the lodgment day.

    Remember, the lodgment day is either the day you lodge the Superannuation guarantee charge statement OR the 28th day of the 2nd month following the end of the quarter, whichever is the later. There are 149 days from 1 April to 28 August (the later of the two days – not including 28 August).

    The nominal interest is calculated for 149 days at 10% per annum.

    Nominal interest = SGC shortfall x 149 days ÷ 365 days × 10% = $155.

    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 + $155 + $240 = $4,195.

    Question 7: C is correct. You can choose either option. If you choose to pay the super funds directly we recommend you consider seeking advice from a tax advisor about applying the late payment offset or carry forward option.

    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
    • an administration fee of $20 per employee, per quarter applies
    • contact us as soon as you realise there will be a delay in payment
    • use the Super guarantee charge statement spreadsheet version (XLSX 522KB)This link will download a file to save time and effort.
      Last modified: 28 Apr 2020QC 58510