How to avoid superannuation penalties from the ATO

As small business owners, we are constantly reminded of our various tax obligations every day but did you know that Superannuation payments will attract more interest and penalties than unpaid tax liabilities.  It’s imperative that businesses make their superannuation payments on time, every time, to avoid superannuation penalties.

The Federal Government is cracking down on late and unpaid super payments, which includes substantial penalties for small businesses involved. Read my case study below for a real-life scenario.

Currently, annual unpaid super is sitting at around $3.6 billion. So, it comes as no surprise that the Australian Tax Office is about to receive funding that will allow for more reporting from superannuation funds, and greater power to dole out penalty notices.

The bad news for small business is that they sit squarely in the crosshairs of these reforms after an investigation highlighted they make up 97 percent of unpaid super made to the ATO.

no small business can afford to shoulder these penalties and legal proceedings

Most small businesses do everything they can to ensure they submit their payments on time, but human error can, unfortunately, lead to errors and penalties from the ATO.

The penalties for late super payments
If you are using Excel spreadsheets or other manual methods, it can be easy for mistakes to slip into your super payments to employees. The bad news is that the ATO has a big stick they can use against businesses that don’t pay super on time, in the form of the Super Guarantee Charge (SCG).

This fee includes interest for the period of time it remains unpaid, as well as a $20 administration charge for each employee—which means this figure can get pretty hefty if the payments aren’t up to scratch.

Beyond that, the ATO can make you (the business owner) liable if the SGC is not paid on time. In the end, these are penalties and legal proceedings that no small business can afford to shoulder.

There are numerous other penalties to keep in mind as well, including:

  • General interest charge: additional fees accrued if the SGC is not paid by the due date;
  • Administrative penalty: applied if the SGC is constructed around false or misleading information. Can be up to 75 percent of the shortfall;
  • Failing to keep records: the maximum fine here is $6300;
  • Failing to provide an SGC statement: even lodging it late can result in a fine 200 percent higher than the original charge and;
  • Failing to pass on a TFN: Fines up to $2100 per employee can be applied if TFNs are not supplied on time.

In some cases, the ATO can also launch an audit as a result of late superannuation payments, costing you productivity, on top of any monetary penalties received.

Not so long ago we recently underwent a superannuation audit with a client.  Here is our case study.

Case study
A client of ours always met his super obligations. In some situations, the late payment was due to incomplete and incorrect super records provided by the employees.

A month or so after a former employee resigned due to conflict with business owner they reported him to the ATO for non-payment of super.

This resulted in a super review. On receipt of the documents the ATO concluded that all super obligations have been met.  However, as the super wasn’t received by the due date each quarter the client had to undergo a full superannuation audit and complete the super surcharge forms for each employee per quarter.

The outcome was that he was hit with a $7,500 fine from the ATO on top of our time.

Naturally we contacted the ATO on his behalf to speak with them about this and conveyed our shock and disappointment.

ATO categorically stated that due to him being reported through the system they had to follow through and fine him.  ATO waived the $20 admin fee per employee but everything else was due and payable within 14 days.

I am frustrated as to how small business can carry this country when the ATO is doing nothing to support small business but rather penalise them.

That is why I always recommend cloud accounting systems to streamline super payments, dodging headaches coming from the tax man.

How much and when do I pay?
Superannuation is 9.5% of ordinary earnings

Quarter        Period                                           Payment due date

1                  1 July – 30 September                    28 October

2                  1 October – 31 December               28 January

3                  1 January – 31 March                     28 April

4                  1 April – 30 June                            28 July 

How cloud accounting can prevent late super payments
The last thing any business wants is to be subject to ATO penalties or audits, despite their best intentions to do the right things. So often the best solution is to use software that takes the heavy lifting out of your hands.

Cloud accounting services such as Intuit QuickBooks Online with the Federal Government’s SuperStream system, allowing you to streamline your payments and employee data. This is mandatory for all employers making super contributions, and it also connects with systems like QuickBooks Online and KeyPay, which are all fully ATO compliant.

These systems are convenient for SMB owners as they take human error out of the equation. When there is so much that goes wrong with manual payments (and we have seen it happen countless times), is it worth the risk?

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Don’t fall through the cracks – get your superannuation in order now

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Lielette Calleja
Lielette Calleja is an award-winning cloud accounting business specialist that thrives on helping business owners manage their business better with the use of innovative and effective cloud technology. She is the director of All That Counts that provides across the board bookkeeping, training and management accounting services to the SMB sector.

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