The Cost of paying Staff Superannuation just One Day late
Business owners get busy and sometimes bills are accidentally paid late. Or sometimes the timing of cash flow requires a business to stretch the payment of a bill. But if there is one payment that businesses should prioritise, its superannuation. Not doing so can cost your business thousand of dollars.
Whilst most business owners understand that superannuation must be paid 28 days after the end of each month, most accountants haven’t properly educated them on the cost of paying super late.
If superannuation is paid just one day late, the ATO requires that business to submit a Superannuation Guarantee Charge (SGC) Statement and pay SGC. The SGC is made up of three parts:
Any superannuation guarantee shortfall amount. That is, the superannuation that was paid late or not yet paid. The catch though, is that this is now calculated on their full wage, including overtime pay.
Nominal interest (currently 10%) on the super liability, accruing from the start of the quarter.
An admin fee of $20 per employee
Take this hypothetical situation: your June quarter wage expense for 15 employees is $300,000 ($250,000 from ordinary earnings and $50,000 is from overtime hours). $26,250 is required to be paid by the 28th of June. What if it’s paid on the 29th? Assuming that you submit an SGC Statement:
Your SG Shortfall amount is now $31,500 (as it’s calculated on the gross wage including overtime)
The interest is $1,285
The admin fee is $300
By paying just one day late, you are now required to pay $33,085 instead of $26,250! That one day costing you $6,835.
Even though you are legally obligated to, what if you don’t submit an SGC statement? The ATO may eventually request for your business to do so, making the costs even more severe.
For instance, using the above example where the super is paid a day late and you don’t submit an SGC statement, if they ATO contact you 24 months later to request that you submit a statement (which they’re entitled to do), interest is accrued on the full SG shortfall amount over 24 months - even though the super was paid 24 ago! Meaning the nominal interest amount is instead $7,320. A pretty significant cost for paying one day late. So if you do happen to pay super late, ensure that you submit an SGC statement as soon as possible. Meaning that by paying Super one day late and NOT submitting an SGC statement, you have cost your business $12,870.
This isn’t including any further penalties that might be applied by the ATO.
With most superannuation payments required to be paid via a Clearing House, the ATO are improving their detection of late super payments, placing even more importance on ensuring the payments are made by the due date. If, for whatever reason, a payment is made after the due date, it is crucial that you prepare and submit an SGC statement.
We encourage you to contact us if you have any questions or for any assistance in preparing an SGC statement.