12 September 2024
Hopefully you never come across the Superannuation Guarantee Charge (SGC). But if you do, there are certain things you need to know as an employer to get things back on track with your employees and the Australian Taxation Office (ATO).
As an employer you’re required to pay the minimum amount of superannuation guarantee (SG) to eligible employees at least quarterly. The SGC applies if you don’t pay the SG on time, pay less than required or to the correct super fund. The charge is paid to the ATO and is not tax deductable.
How much is the SGC?
How much the SGC is will depend on the outstanding amount of SG payable plus a couple of additional charges. It covers:
- The SG shortfall: This is the difference between how much super you should have paid, and how much was paid to your employee’s super fund. This is based on salary or wages, not ordinary time earnings
- The nominal interest component: This is the interest that builds up on the SG shortfall from the start of the quarter when the super was due, until the date when you lodge your SGC statement with the ATO. The 'lodgment day' is the later of:
- the 28th day of the second month following the end of the relevant quarter
- the day you lodge the Superannuation guarantee charge statement.
The interest rate is currently 10% per year. - The administration fee: This is currently a fixed fee of $20 per employee, per quarter, that you must pay to cover cost of the ATO's administration of the SGC scheme.
Here’s an example1
Karen runs a small business that employs 10 staff.
During quarter 1 of the 2024-25 financial year (1 July to 30 September 2024), each employee earns $10,000 in salary or wages.
When Karen pays her employee super contributions to their chosen fund, she forgets that the SG rate increased from 11% to 11.5% on 1 July 2024. She is now liable for the SGC.
-
Step 1 – calculating the SG shortfall
Here’s how she calculates the SG short fall in two steps:
- Salary or wages (for 10 staff) = $10,000 x 10 = $100,000
- SG shortfall = salary or wages x difference in SG rate (0.5%)
= $100,000 x 0.5%
= $500
-
Step 2 – calculating the nominal interest
Karen lodges her SGC statement on 20 November when her accountant brings the error to her attention. She counts the number of days between 1 July 2024 and 28 November, which is the later of the 2 dates for the relevant quarter. This is 150 days.
She calculates her nominal interest as:
- Super guarantee shortfall divided by the number of days in the year × number of days from the start of the quarter until the lodgement day × 10%
- Super guarantee shortfall × 150 days ÷ 365 days (1 year) × 10%
= $500 × 150 days ÷ 365 × 10%
= $20.55
-
Step 3 – calculating the administration fee
Karen calculates her administration fee for quarter 1.
Number of employees for whom there was a shortfall × $20
= 10 employees × $20
= $200 -
Step 4 – calculating the SGC
Super guarantee shortfall + nominal interest + administration fee
= $500 + $20.55 + $200
= $720.55
Unlike the regular super contributions, the SGC is not tax deductible. This means that Karen will be paying the SGC out of her own pocket.
On top of the additional cost to your business, you may also face extra penalties or legal action from the ATO if you don’t lodge your SGC statements or pay this on time, so it’s important to keep on top of your super obligations and any changes.
1. The case study is provided for illustrative purposes only.
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