Pay InvoiceTax Planning Sessions

Understanding the Australian Super Guarantee Charge

Paying the employee’s super to the correct super fund and that too on time is undoubtedly one of the most important quarterly tasks. However, when things are going too smoothly, it is to forget about this and miss the due date.

If this has happened to you (or might happen in the future), do not leave it for another day. Not making super contributions to the right super funds or not paying on time will subject you to paying the SGC or Super Guarantee Charge.

If you do not take care of this issue early, your interest bill will only add up with each passing day.

Super Guarantee Charge (SGC) and Super Guarantee (SG)- are these the same?

A lot of employers get confused over Super Guarantee and Super Guarantee Charge. While they might sound the same, they are not. Here’s the difference between the two.

Super Guarantee Charge

The Super guarantee (SG) is the compulsory employer contribution made regularly to the employees’ super funds. From 1 July 2023 downwards, the Super Guarantee (SG) rate is a minimum of 11% of the ordinary time earnings (OTE) for most employees. The SG rate is expected to rise gradually to 12% by 1 July 2025.

The Super Guarantee charge (SGC), on the other hand, is the penalty imposed by the Australian Taxation Office (ATO) if the correct super is not paid on time. There is a form called the Super Guarantee Charge (SGC) Statement, which needs to be lodged if this happens.

What’s more, you become ineligible to claim any tax deduction for the Super Guarantee (SG) contributions against your business income.

Three components of the Super Guarantee Charge

The SCG or Super Guarantee Charge has three components, which are:

  1. SG shortfall amount, which includes any choice liability
  2. Interest accumulated since the beginning of the relevant quarter on the SG shortfall amount
  3. Administration fee, which is $20 per employee per quarter

In order to report or rectify any underpaid or missing payments, or if any SG payments were made contrary to your choice obligations, you must lodge your SGC statement by the due date and then pay your outstanding SGC Super Guarantee Charge amount.

Keep in mind that the usual SG contributions are tax-deductible, but when it comes to SGC, it is not.

Along with this, even if you made a delay of a few days or weeks, you will still need to lodge an SGC Statement as well as pay the SGC balance.

SG shortfall

The Super Guarantee shortfall is the amount of super calculated on the employee’s full salary and wage for the period. It is not the same as the OTE (Ordinary Time Earnings) amount used for the standard calculation of SG.

As a result, when your employee receives overtime or any other benefits, such as salary and wages, but is not a part of the OTE for the period, the SG shortfall becomes higher than the SG contributions for the quarter.

If you choose to pay some SG on time, not the whole amount, the SG shortfall will be reduced accordingly to represent the proportion of the amount paid on time.

Choice liability – What is it?

If the choice of fund or stapling rules are not correctly applied by you, you will be subject to a choice liability. A choice of liability is a part of the Super Guarantee Charge.

Choice liability - superannuation guarantee charge

You will be accountable for this if:

  • You have not provided the eligible employees with a Standard Choice Form within the set timeframe.
  • The super contributions you made were into a complying super fund, which is not the one your employee chose.
  • The employee started on or after 1 November 2021 and did not make a choice while you, as the employer, also didn’t request stapled fund details (or didn’t contribute to the stapled fund you were given details of).
  • You imposed a fee on your employees for implementing their choice of fund.

In such cases, the contributions made are considered ‘no choice contributions’.

Super Guarantee Charge – Due date

When you, as an employer, make SG contributions on behalf of the people you have employed, you have to make the payment in full by the quarterly due date. This due date is 28 days following the end of each financial quarter.

Super Guarantee Charge - due date

If you can’t meet the deadline or have a choice liability, you must lodge an SGC statement, and you will also have to pay SGC by the due date in the next calendar month.

If, for any reason, you will not be able to lodge the SGC statement or pay the super guarantee charge by the due date, and you know it, it is recommended that you apply to the ATO for some extra time.

An application requesting an extension to the Australian Taxation Office should be in a written format where the reason is clearly stated, or you can phone them as well.

The ATO must receive this application before the SGC due date. The GIC or general interest charge will be applicable until the day you pay the SGC in full from your deferred payment request.

If you fail to meet all your SGC liabilities by the due date and haven’t notified the ATO about it, you will have stronger actions with additional penalties.

Please note that if the due date falls on a public holiday or a weekend, the ATO allows you to make the payment and also lodge the SGC statement on the coming business day.

Calculating the Super Guarantee Charge

When completing the SGC statement, you will have to work out your own SGC. To calculate your SGC, you can use the following formula:

Super guarantee shortfall (with choice liability) + nominal interest + administration fee = Super Guarantee Charge

The ATO understands that it can be a little tricky to work out your SGC, which is why they provide a couple of useful tools that can help employers. These are the electronic SGC Statement Calculator Tool and the Excel spreadsheet version of the calculator.

calculating SGC

Completing and lodging the SGC statement

For making the SGC payment to the ATO, you will require a payment reference number (PRN). How will you get this number? You can find the payment reference number on the SGC notice or payment slip received from the ATO. If you have not received this number, contact the ATO.

You can lodge your SGC statement through any of the following three ways:

Use the SGC calculator.

The very first method to do is using the SGC calculator in the ATO’s Online Services. This tool will ask you a series of questions to help you figure out if you need to pay the SGC for your employees and, if you do, how much.

Calculator for Making SGC payment to the ATO

At the end, the calculator will electronically lodge your SGC statement.

Complete the SGC statement Excel spreadsheet.

Another way to do this is by completing the SGC statement Excel spreadsheet and lodging it through ATO’s Online Services. This spreadsheet will include detailed information on calculating your SGC liability.

Use the SGC statement and Calculator tool to generate a PDF.

There’s another way to do it, but it is not recommended because of the high chances of mistakes, and it also takes a lot of time to process your statement.

In this method, you can use the SGC statement and the SGC calculator tool to generate a PDF containing your SGC statement and then mail it to the ATO.

 

Disclaimer: This website is designed for informational and educational purposes. Although we exert diligent efforts to maintain the accuracy and reliability of the content, we must disclaim liability for any errors, omissions, or inaccuracies. The content provided is “as is” and is not accompanied by warranties, whether expressed or implied. It should not serve as the sole basis for financial or legal decisions.

Given the evolving nature of financial regulations and conditions, the accuracy and reliability of information may change over time. Users are urged to exercise due diligence and consult with a qualified financial professional for personalized advice. ‘Clear Tax Accountants’ bears no responsibility for direct or indirect consequences, encompassing financial loss or legal matters stemming from the use or misuse of the information on this website.

Please be aware that the information, by no means, is a substitute for financial advice.