It’s easy to see the benefits of paying the super guarantee on time by revisiting the example of Imogen.
Example - Super guarantee paid 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.
For quarter 1 of 2023–24 (1 July to 30 September), the super guarantee due date is 28 October.
During quarter 1 of 2023–24 (1 July to 30 September 2023), each of Imogen's employees earns $12,000 in salary or wages.
For each employee, $2,000 of their total salary or wages is payment for overtime. Because 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 super gurantee on time (by 28 October) into the complying super fund accounts for her employees. Because it's paid on time, the $33,000 super guarantee payment is tax deductible for Imogen's 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 didn'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 quarter 1 due date.
She lodges the Super guarantee charge statement and pays the super guarantee charge (SGC) the same day.
Because Imogen hasn't paid the super guarantee on time, she uses the Super 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 Super guarantee charge statement to the ATO by 28 November. Because she lodges the statement on 20 November (before the due date), she avoids an additional SGC – 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 SGC for late payment ($41,827.40) - you can see the super guarantee charge adds an extra $8,827.40 for Imogen to pay.
The SGC 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 SGC.
