In the latest update from the Australian Taxation Office (ATO), it has been revealed that workers are owed a staggering $3.6 billion in superannuation guarantee.
The overall compliance rate for employer superannuation guarantee (SG) contributions appears positive with over 94%, over $71 billion, collected without intervention from the regulators in 2020-21.
Despite these gains, there is still a net gap of 5.1% equating to a staggering $3.6 billion that should be in the superannuation funds of workers. Lurking within the amount owed is $1.8 billion of payments from hidden wages. That is off-the-books cash payments, undisclosed wages, and non-payment of super where employees are misclassified as contractors.
Employers should not assume that the Government will tackle SG underpayments the same way they have in the past with compliance programs. Instead, technology and legislative change will do the work for them.
Single Touch Payroll (STP) Matched To Super Fund Data
STP, the reporting mechanism employers must use to report payments to workers, provides a comprehensive, granular level of near-real-time data to the regulators on income paid to employees. The ATO is now matching STP data to the information reported to them by superannuation funds to identify late payments and under or incorrect reporting.
So, What Happens When SG Is Paid Late?
If an employer fails to meet the quarterly SG contribution deadline, they need to pay the SG charge (SGC) and lodge a Superannuation Guarantee Statement within a month of the late payment. The SGC applies even if you pay the outstanding SG soon after the deadline. The SGC is particularly painful for employers because it is comprised of:
- The employee’s superannuation guarantee shortfall amount – i.e., the SG owing.
- 10% interest p.a. on the SG owing for the quarter – calculated from the first day of the quarter until the 28th day after the SG was due, or the date the SG statement is lodged, whichever is later; and
- An administration fee of $20 for each employee with a shortfall per quarter.
Unlike normal SG contributions, SGC amounts are not deductible, even if you pay the outstanding amount.
The Danger Of Misclassifying Contractors
Many business owners assume that if they hire independent contractors, they will not be responsible for PAYG withholding, superannuation guarantee, payroll tax and workers’ compensation obligations. However, each set of rules operates slightly differently and, in some cases, genuine contractors can be treated as if they were employees. There are significant penalties faced by employers that get it wrong.
A genuine independent contractor who is providing personal services will typically be:
- Autonomous rather than subservient in their decision-making;
- Financially self-reliant rather than economically dependent on your business; and
- Chasing profit (that is, a return on risk) rather than simply accepting payment for the time, skill and effort provided.
‘Payday’ Super From 1 July 2026
The Government intends to introduce laws that will require employers to pay SG at the same, or similar time, as they pay employee salaries and wages. The logic is that by increasing the frequency of SG contributions, employees will be around 1.5% better off by retirement, and there will be less opportunity for an SG liability to build up where the employer misses a deadline.
What Is Proposed?
The consultation paper canvasses two options for the timing of SG payments: on the day salary and wages are paid; or a ‘due date’ model that requires contributions to be received by the employee’s superannuation fund within a certain number of days following ‘payday’. A ‘payday’ captures every payment to an employee with an OTE component.
Do you need assistance with lodging your superannuation guarantee? Contact our Walker Hill Accounting team today! support@walkerhill.com.au.
