It’s easy to see the benefits of paying the super guarantee on time by revisiting the example of Imogen.
Example - Paying super guarantee on time and to the correct funds
This example is based on the super guarantee rate for the financial year in which the employee was paid. During quarter 1 of 2023–24 (1 July to 30 September 2023), each of Imogen's employees earn $12,000 in salary or wages.
For each employee, $2,000 of their total salary or wages is paid for overtime. As overtime doesn’t form part of ordinary time earnings, each employee’s ordinary time earnings for the quarter are $10,000.
For quarter 1, 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 × 11%)
= $300,000 × 11%
= $33,000
Imogen pays on time she will have paid the $33,000 (by 28 October) into the complying super fund accounts for her employees. The $33,000 will then be tax deductible for the business.
Example - Super guarantee not paid on time
For quarter 1 of 2023–24 (1 July to 30 September), the super guarantee due date is 28 October.
However, Imogen doesn't pay it on time. On 20 November, she realises she hadn't paid the super guarantee on time because her contributions were paid to the fund after the quarterly due date.
She lodges the Superannuation guarantee charge statement and pays the super guarantee charge (SGC) the same day.
As Imogen hasn't paid the super guarantee on time, she uses the Superannuation guarantee charge statement to calculate the amount of SGC she has to pay:
Super guarantee shortfall + nominal interest + administration fee
= $39,600 + $1,627.40 + $600
= $41,827.40
Imogen is not able to claim a tax deduction for this amount.
Imogen is required to send the Superannuation guarantee charge statement to the ATO by 28 November. As she lodges the statement on 20 November (before the due date), she avoids an additional super guarantee charge – known as the Part 7 penalty. This extra charge is explained later in this course.
Comparing the 2 examples - super guarantee paid on time ($33,000) and the super guarantee charge for late payment ($41,827.40) - you can see the super guarantee charge adds an extra $8,827.40 for Imogen to pay.
The super guarantee charge is paid to the ATO. It’s then distributed to the employees’ complying super funds, less the administration fee.
The extra cost of late payment can be significant, particularly when you consider the deductibility of on-time payments and the non-deductibility of the super guarantee charge.
