Show download pdf controls
  • Superannuation and insolvency

    The following information sets out how superannuation affects various insolvency administrations.

    Since 31 December 2007, the superannuation guarantee charge (SGC) has been required to be paid before payments to ordinary unsecured creditors. This means it ranks equally with employees' entitlements for wages and super contributions as long as there are assets available for distribution to priority creditors.

    Consequently, the SGC is included in the capped amount of $2,000 that certain excluded employees, such as directors and their relatives, can claim as a priority.

    Superannuation guarantee charge

    The SGC is the total of the individual employee shortfalls plus the administration component plus the nominal interest component.

    Insolvency practitioners need to report any super shortfalls by lodging an SGC statement with us.

    In order for us to raise the correct SGC assessments, we require the following information for each employee:

    • full name
    • date of birth
    • address
    • tax file number (TFN)
    • super guarantee (separate for each quarter)
    • excluded/capped employees clearly identified.

    To submit the information electronically, refer to Super guarantee charge statement – Online services for agents and Business Portal users.

    Once you submit the form, the super account will be updated automatically and we will issue a statement of account without delay.


    Since 31 December 2007, the SGC together with super contributions has been included in section 556(1)(e) of the Corporations Act 2001 (Corporations Act).

    SGC claims regarding excluded employees, such as directors and their spouses, will be a priority to the extent of the first $2,000 claimed. Any amounts exceeding $2,000 will rank with unsecured creditors.

    Deeds of company arrangement

    Since 31 December 2007, all deed of company arrangement have been required to include a clause to the effect that 'eligible employee creditors' will enjoy a priority under the administration at least equal to what they would have received had there been a winding up. The term 'eligible employee creditor' is defined to include a creditor with a liability that falls within the priority afforded by section 556(1)(e) of the Corporations Act. The ATO's claim for the SGC falls within this definition.

    Claims by an 'eligible employee creditor' are to be paid in priority to other unsecured creditors and ahead of any priority that otherwise might be enjoyed by a charge holder.

    Affected employees may vote down the inclusion of such a provision at a meeting held prior to the second meeting of creditors. This will depend on their notice of that meeting receiving a written opinion from the administrator, (with reasons for the opinion and other relevant information), on whether the non-inclusion of that provision would likely result in the same or better outcome for them compared to what they would have received on an immediate winding up.


    Although not specifically legislated for, the inclusion of the SGC as a priority debt in section 556(1)(e) of the Corporations Act means that the SGC will obtain a priority in a receivership through the operation of section 433(3)(c) of the Corporations Act. The SGC will be treated in the same way as other wage related priority debts under section 556(1)(e).


    The SGC has been afforded priority in bankruptcy under section 109 (1C) of the Bankruptcy Act 1966 (Bankruptcy Act) since 5 May 2003. The priority under section 109(1C) extends to general interest charge in respect to the non-payment of the SGC. The SGC is included in the category of employee entitlements including salary, wages or commission.

    The maximum amount subject to the priority is adjusted annually:

    • $4,450 for the year ending 30 June 2017
    • $4,500 for the year ending 30 June 2018.

    Part IX and X arrangements

    There is no legislative requirement for the SGC to be afforded a priority in arrangements made pursuant to Parts IX and Part X of the Bankruptcy Act. However, trustees frequently address this anomaly by including a clause in the deed that gives the SGC a similar priority to that which it would have received in bankruptcy. The Commissioner may vote against a deed that does not provide priority for SGC if bankruptcy would yield a greater return.

    Double proofs

    Since 31 December 2007, external deed of company arrangement (DOCA) administrators have been required to reject a proof of debt from a super fund for a super contribution that results in a SGC (section 444DB). The SGC will be preferred since it includes an interest component, providing employees a greater benefit. All DOCAs must now contain a provision to that effect.

    Liquidators will also have the power under section 553(1A) of the Corporations Act to reject the whole or part of a proof of debt for super where the amount has already been paid by way of the SGC or there is an admissible proof for the SGC.

    How dividend payments are applied

    Section 64B of the Superannuation Guarantee Administration Act 1992 sets out a formula for the allocation of payments received on a pro rata basis.

    Last modified: 21 Feb 2020QC 18228