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Subject: Superannuation Guarantee Charge (SGC) on remuneration paid half yearly.
Question 1
Does an employer have a superannuation shortfall liability amount under section 19 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) in respect of a worker for the period of two quarters where the employer does not make any salary or wage payments to the worker?
Answer:
No, Please see reasons for decision
Question 2
Does an employer have a superannuation guarantee shortfall amount payable under section 19 of the SGAA in respect of on time superannuation guarantee contributions made for a worker by the statutory due dates for the quarters in which salary and wage payments have been made up to the maximum contributions base legislated in section 15 of the SGAA?
Answer:
No, Please see reasons for decision
The arrangement commences on:
After 1 July 2012
Relevant facts and circumstances
Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.
Under the terms of a standard contract, the worker is entitled to a base remuneration amount of $Y, out of which the worker can nominate how much, is contributed to superannuation (subject to the superannuation guarantee statutory minimum).
In the relevant year the employer commenced making monthly payments to all workers.
The pay frequency is governed by contractual terms between the employer and each worker; it is open for an individual worker to negotiate less regular pay frequency on a prospective basis for remuneration that is not yet earned.
The employer received a request from a worker to pay remuneration half yearly, 3 months in arrears and 3 months in advance. The worker is engaged on the standard contractual terms and has nominated the statutory minimum superannuation contributions.
Relevant legislative provisions
Superannuation Guarantee (Administration) Act 1992 section 15
Superannuation Guarantee (Administration) Act 1992 section 17
Superannuation Guarantee (Administration) Act 1992 section 19
Superannuation Guarantee (Administration) Act 1992 section 23
Superannuation Guarantee Charge Act 1992 section 5
Superannuation Guarantee Charge Act 1992 section 6
Reasons for decision
Summary - Question 1
For the two quarters where the employer does not make any salary or wage payments to the worker there will be no superannuation shortfall liability amount under section 19 of the SGAA.
Summary - Question 2
For the two quarters where the employer does make salary and wage payments to the worker and that for each of these quarters the employer makes the required SG contributions up to the maximum contributions base applicable for each respective quarter by the legislated due dates there will be no superannuation shortfall liability amount under section 19 of the SGAA.
Detailed reasoning
Superannuation Guarantee
All employers are required to provide a minimum level of superannuation support for their eligible employees by the due date.
Employers that do not pay the minimum superannuation for their eligible employees by the cut-off date will have a superannuation guarantee (SG) shortfall.
These employers are required to lodge a superannuation guarantee charge (SGC) statement and pay us the outstanding SGC. Employers that fail to do this may be issued with default assessments.
The SGC is calculated by adding together:
· the total of the individual SG shortfalls for the quarter, and
· a nominal interest component, and
· an administration component
Section 5 of the Superannuation Guarantee Charge Act 1992 (SGCA) states that the SGC is imposed on any SG shortfall of an employer in a quarter.
Section 6 of the SGCA states that the amount of SGC payable on an SG shortfall is an amount equal to the amount of the shortfall.
The nominal interest and administration component amounts are not penalties, but are specified components of the SGC that become payable once an SG shortfall exists for an employer.
Superannuation guarantee shortfall
The SG shortfall is calculated on employee's total salary or wages for the quarter, limited to the maximum contribution base.
The maximum contribution base is defined in section 15 of the SGAA. The indexed amount is published by the ATO in a Determination in May or June of each year for the following year.
Section 19 of the SGAA specifies the employer's individual SG shortfall for an employee, for a quarter, is the amount calculated using the following formula:
Total salary and wages paid by the employer to the employee for the quarter |
X |
Charge percentage for the employer for the quarter 100 |
Subsection 23(6) of the SGAA allows for superannuation contributions made:
· By an employer for the benefit of an employee, and
· To a complying superannuation fund or an RSA, to be taken into account for an SG quarter if it is in fact made by the 28th day after the end of the quarter. These contributions reduce the employer's charge percentage, and therefore liability, to the SGC.
An employer's individual SG shortfall is calculated by using the following formula:
Total salary or wages paid by the employer to the employee for the quarter |
X |
Charge percentage for the employer for the quarter 100 |
The charge percentage is 9%.
Nominal interest
The nominal interest component is calculated on the total of the employer's individual SG shortfalls at 10% per annum from the beginning of the quarter in question to the day the assessment is made.
The nominal interest is calculated using the following formula:
Total number of days from beginning of quarter until the date the assessment was made |
X 10% interest X shortfall $ |
Number of days in a year |
Administration Component
The administration component is $X for each employee the employer has an individual SG shortfall for in the quarter. The administration component is calculated using the following formula:
Number of employees X $X
Application to your circumstances:
In a quarter where no salary or wages are paid to the worker then the figure of zero is used in the formula in subsection 19(1) of the SGAA.
In a quarter where salary and wages are paid then that amount or the maximum contribution base for the quarter (whichever is the lesser) is used in the formula in subsection 19(1) of the SGAA. Where contributions have been made in accordance with section 23 of the SGAA and the calculation of the charge percentage reduction in subsection 23(2) of the SGAA equals the charge percentage specified in subsection 19(2) of the SGAA (currently 9%) the number used for the charge percentage in the formula in subsection 19(1) of the SGAA will be zero.