My business isn’t paying superannuation. What are the consequences?

There may be various consequences including personal liabilities and penalties if you have a business and are not paying superannuation to your employees. Here is an overview of your requirements as an employer, and the consequences for failing to pay super.

What are the requirements to pay superannuation?

Businesses must pay superannuation to an employee’s superannuation fund at a rate of 9.5% of their gross ordinary time earnings.

For most businesses, superannuation must be paid quarterly on the dates below although when a due date falls on a weekend or public holiday, you can make the payment on the next working day:

3 consequences of not paying superannuation

Consequence #1: Superannuation guarantee charge (SGC) is payable

When super is not paid by the quarterly due date, it becomes payable to the Australian Tax Office (ATO) as a superannuation guarantee charge (SGC). This charge includes:

  • the initial super guarantee amount calculated on employees’ wages or salary
  • interest on the super guarantee (currently 10%)
  • an administration fee of $20 per employee, per quarter.

If your business has not paid superannuation then you are required to report the unpaid super to the ATO by lodging a Superannuation guarantee charge statement, which is due on the dates for payment of quarterly superannuation shown in the table above.

If you fail to notify the ATO of SGC payable by lodging a SGC statement for the relevant quarter, an additional penalty may be imposed.

Consequence #2: SGC is not tax deductible

If you don’t pay super and therefore have to pay SGC to the ATO, then the amount of SGC paid is not tax deductible. This means that, in addition to paying the SGC, you will also have more income tax to pay.

Consequence #3: Director Penalty Notice liability

If your company fails to pay superannuation but lodges its SGC statement/s by the SGC statement due dates, the ATO can issue a director penalty notice to you. You can avoid liability under the notice if:

  • the SGC is paid; or
  • the company is placed in voluntary administration within 21 days of the date of the Director Penalty Notice; or
  • the company is placed in liquidation within 21 days of the date of the Director Penalty Notice.

If your company fails to pay superannuation and it also fails to lodge SGC statements by the SGC statement due dates, the directors are automatically personally liable for unpaid superannuation. In these circumstances:

  • the ATO will issue a Director Penalty Notice to recover superannuation directors
  • placing the company in liquidation or voluntary administration will not avoid liability
  • the ATO can estimate unpaid super
  • the ATO can issue Director Penalty Notices after a company is already in liquidation or voluntary administration.

In May 2019 new legislation was passed to change the date upon which company directors become automatically liable for SGC amounts.  The new date is the date which SGC Statements are due which are:

Quarter Period Super Due for Payment SGC Statement Due Date
1 1 July – 30 September 28-Oct 28-Nov
2 1 October – 31 December 28-Feb 28-Feb
3 1 January – 31 March 28-April 28-May
4 1 April – 30 June 28-Jul 28-Aug

Contact us for advice

If your business is not paying superannuation and you’re worried about the consequences, please get in contact with us for a no-obligation meeting.

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