Why is it important to pay superannuation on time?
If you hire employees in your business, superannuation is something you would need to budget for when calculating your cost.
Under the superannuation guarantee, employers must pay superannuation contribution of 9.5% (2020/2021) of an employee’s ordinary time earnings if an employee is paid $450 or more before tax in a month. If you use a payroll software, these amounts are usually calculated automatically.
Due dates for superannuation payment
| Period | Cut-off Date |
|---|---|
| 1 July to 30 September | 28 October |
| 1 October to 31 December | 28 January |
| 1 January to 31 March | 28 April |
| 1 April to 30 June | 28 July |
The ATO has stated that the superannuation amount needs to be received by the fund by its cut-off date for it to be tax deductible, which is why we recommend that best practice is to pay for these obligations at least a week prior to the due date. This is because once the amount has been disbursed from your business account, it takes a few days for it to be received in your employees’ fund.
It is important to remember that, if you pay a salary to yourself through your business, you must also pay the minimum super for that salary.
Since 1 July 2018, the implementation of Single Touch Payroll means that employers are required to report every pay run, including superannuation guarantee information to the ATO. This means that the ATO has clear visibility of what superannuation is owed to the employee.
What happens if you don’t pay super on time?
- Inability to claim for tax deductions:
If your payment is late for even by a day, you will not be able to claim the expense as a tax deduction. This means that your tax bill may be higher at the end of the financial year. - Penalties:
You will be required to lodge a Superannuation Guarantee Charge (SGC) Statement to the ATO for each quarter you fail to pay your employees’ super on time. The charges include the shortfall amount, interest of 10% per annum, and administration fees. None of these expenses are tax deductible too.
There are many reasons why business owners fail to pay their superannuation guarantee on time. This could be due to cash flow issues or simply forgetting about the due date. We recommend setting yourself a reminder in your calendar to pay this out as soon as each quarter ends. If there is a cashflow issue, it is then important to speak to your accountant to get on top of it.
How to pay for super?
There are a few ways to pay for employees super:
- Payroll Software
This is probably the easiest way to pay for superannuation if you are already using compliant accounting software. With XERO, superannuation payment is automatically direct debited out from your nominated business account. We recommend paying superannuation on every pay cycle so that the cut-off date will never be missed. - Clearing House
You can use the Small Business Superannuation Clearing House if you have access to the ATO Business Portal. - Super Fund Portal
Most large funds have online portals that you can use to pay for your employees' super. This method may however be troublesome if you have multiple employees using multiple super funds.
Key takeaway?
Pay your super on time. Speak to your accountant to discuss the best way for you to pay your superannuation obligations on time.