Not paying Super? Penalties are guaranteed.

Did you know: In the 2020/21 Financial Year, over 31,000 penalties were imposed in an amount exceeding $561 million for the intentional disregard of a taxation and/or industrial relations legislation, recklessness, and failure to take reasonable care?

A portion of these penalties issued were due to a failure to pay an employee’s superannuation guarantee, currently sitting at 10%. With the Australian Taxation Office (ATO) conducting a nation-wide overhaul, it is important that you know the scope of their powers and how it directly affects you.

What is the Superannuation Guarantee?

Introduced on 1 July 1992, the super guarantee system requires employers to pay super contributions (in addition to salary or wages) into a complying super fund or retirement savings account, so that your eligible employees can enjoy the benefits of super in their retirement. You may also be required to offer your employees a default superfund.

You must pay an employee’s superannuation in accordance with your ordinary pay cycle or once a quarter. In the event that you do not pay superannuation, you may be liable for penalties, accrued interest and two years’ imprisonment depending on the severity of the disregard.

ATO Audit

The ATO has the power to conduct audits without a limitation. In other words, the period for which the ATO can collect information from your business regarding employee payroll and superannuation obligations is indefinite. Therefore, former employees that have worked at your enterprise over a decade ago can be subject to an ATO investigation and, in the event you have not paid the correct amount of superannuation, you may be liable for the overdue guarantee plus simple interest accruing on a yearly basis and penalties.

Benefit of Hindsight

Not paying super on time, correctly, or at all?

Part 7 of the Superannuation Guarantee (Administration) Act 1992 (NSW) imposes a penalty of up to 200% of the outstanding superannuation guarantee and an administrative penalty up to 75% of the shortfall for submitting false and misleading statements.

You may also incur additional general interest charges if you lodge a superannuation guarantee statement late or fail to pay the overdue amount on time. Failure to keep adequate records, failure to provide the superannuation nominee forms to employees and failure to provide an employee’s tax file number to their nominated superfund also impose fines by way of penalty units.

If you’re a director, you have something else to worry about – director penalty notices. Upon receipt of this notice, you in your personal capacity will be made liable for a penalty equal to the unpaid amount.

Next Steps

Are you an employer who doesn’t know where to start with their employment and payroll obligations? Are you currently facing a payroll audit? Contact the employment law team on (02) 9964 0499 for a no-obligation consultation.