Superannuation Guarantee (SG) compliance according to the ATO.
Superannuation compliance monitoring has always been a high priority for the Australian Taxation Office (ATO). However, in recent times, this has become a strong focus and has been aided with the ATO’s implementation of data analytics software and data collection efforts.
One of the areas which has become a widespread cause of non-compliance among Australian businesses is the lack of superannuation payments on annual leave loading. This has been an area of confusion for many people including tax professionals. However, the ATO’s stance on the matter is reasonably clear: Superannuation Guarantee (SG) needs to be paid on annual leave loading which is not in lieu of overtime. The following will assist in determining whether SG needs to be paid on annual leave loading:
According to the ATO, SG needs to be paid on ordinary time earnings (OTE).
What is included in OTE?
OTE includes ordinary workings hours, annual leave, long service leave, personal leave, annual leave loading (not in lieu of overtime) and certain allowances. Find a more detailed list refer to the ATO website.
In order to rectify a shortfall in SG, employers will need to submit a Super Guarantee Charge (SGC) to the ATO. The ATO provide guidance and resources on what needs to be submitted here.
In addition, there are fees and charges applicable as follows:
- SG shortfall amounts
- Interest on those amounts (currently 10%)
- Administration fee of $20 per employee, per quarter
Late and non-payment of SG can lead to significant penalties imposed by the ATO with penalties to the extent of 200% of the SGC.
In an effort to reduce the potential non-compliance penalties, the Superannuation Guarantee Amnesty Bill has been drafted awaiting parliamentary approval, however, there is no certainty that the Bill will be passed.
Rectifying the matter in-house may be a difficult process and can potentially lead to increased penalties and ATO audits. It may be far more effective to engage an external consultant to manage the process and liaise with the ATO on your behalf.