We have seen a significant amount of activity by the Australian Taxation Office (“ATO”) in relation to reviewing the timing of Superannuation Guarantee (“SG”) payments. Employers are currently required to pay 9.25% (up from 9% in 2012-2013) of Ordinary Times Earnings into the employees’ superannuation fund by the 28th day after each quarter end (i.e. 28 October, 28 January, 28 April, and 28 July). Ordinary Times Earnings is what employees get for their normal hours of work including:
* Over award Payments
* Commissions
* Shift-loading
* Allowances
* Certain bonuses
This payment must be received by the superannuation fund by this date. Posting a cheque on the 28th or depositing money in a normal clearing house will not meet these requirements. The exception to this is if the 28th day is a weekend or a public holiday in which case the next business day will effectively be the cut-off date. Another option for small businesses is access to a free Superannuation Clearing House that is administered by the Department of Human Services. Under this service the SG payments are counted as paid on the date the clearing house accepts them (and they are not rejected by the superannuation fund).
If a company is late in paying, the company (or potentially the directors) are liable to a Superannuation Guarantee Charge (“SGC”) as well as penalties and interest. Furthermore the superannuation payments will not be deductible. It’s important to note that the SGC is based on salary and wages not on Ordinary Times Earnings which means that the surcharge is based on a higher amount than would have been paid in SG. For companies where there is a significant amount of overtime, the SGC can be substantial.
Recommendations
* Don’t get caught out. Make sure your superannuation guarantee is paid on time;
* Ensure your SG is being paid on the correct Ordinary Times Earnings;
* Review your recent superannuation guarantee payments and confirm that the amounts are shown on your bank statements on or before the 28th day of each quarter;
* If you are in the process of acquiring shares in a company, ensure your due diligence procedures include a check on superannuation guarantee payments, or that warranties are include in the Share Purchase Agreement;
* Consider making payments by Electronic Funds Transfer (“EFT”) rather than cheque.
For more information on this topic, please feel free to contact Matuesz Jakubaszek, Manager at RSM Bird Cameron on matuesz. [email protected] or 02 6217 0300.
