Unpaid Superannuation Guarantee: What Employers Need to Know
Recently, the Australian Taxation Office (ATO) released some eye-opening figures, revealing that workers are owed a staggering $3.6 billion in superannuation guarantee. But fear not, because we’ve got the scoop on how you can navigate this complex landscape and stay on the right side of the law.
Understanding the Numbers:
The ATO estimates that over 94% of employer super guarantee (SG) compliance is in good shape, with a whopping $71 billion collected without regulatory intervention in 2020-21. While this might seem impressive, a net gap of 5.1% still amounts to that hefty $3.6 billion owed to hardworking individuals. Let’s delve into the details.
Hidden Wages and SG Debt:
Within the owed amount, $1.8 billion is attributed to hidden wages – off-the-books cash payments, undisclosed wages, and non-payment of super due to employee misclassification as contractors. Additionally, as of February 2022, $1.1 billion of SG charge debt was deemed insolvent, posing a challenge for recovery.
Changing Landscape: Technology and Legislative Shifts:
Gone are the days of assuming the government will handle SG underpayments as before. Instead, technological advancements and legislative changes are taking the lead.
Single Touch Payroll (STP): Keeping it Real-time
STP, the reporting mechanism for employer payments, now offers real-time data to regulators. The ATO is matching STP data with superannuation fund information, aiming to identify late payments and discrepancies in reporting.
Late Payments: A Growing Concern:
Late payments of quarterly superannuation guarantee are emerging as a concern, often due to cash flow issues or technical glitches. The importance of timely contributions cannot be overstated, especially since the super guarantee laws have no tolerance for delays.
Consequences of Late SG Payments:
Late payments come with consequences. Employers failing to meet quarterly SG contribution deadlines must pay the SG charge (SGC) and submit a Superannuation Guarantee Statement within a month. SGC is a blend of the SG owing, 10% interest p.a., and an administration fee per employee. Notably, SGC amounts are not deductible, making it a costly affair for employers.
The Danger of Misclassifying Contractors:
Business owners assuming that independent contractors absolve them of certain obligations might be in for a surprise. Misclassifying contractors can lead to significant penalties. Learn how to differentiate genuine independent contractors from employees.
Future Changes: ‘Payday’ Super from July 2026
The government plans to introduce laws requiring employers to pay SG concurrently with salary and wages, starting July 2026. This aims to benefit employees and minimize SG liabilities.
Proposed Changes:
A consultation paper proposes two options for SG payment timing – aligning with payday or a ‘due date’ model. As the details unfold, we’ll keep you informed, so stay tuned!
Conclusion:
Navigating the superannuation landscape can be complex, but with the right information, you can ensure compliance and avoid pitfalls. As the saying goes, knowledge is power, and we’re here to empower you on your financial journey. Stay informed, stay compliant, and let’s build a financially secure future together!