Understanding the Superannuation Guarantee Charge (SGC)

Do you know in FY2022:

  • In total $1,059 million was raised from SG voluntary disclosures and ATO compliance action.
  • ATO finalised 17,300 SG cases, collecting $550 million in SGC liabilities and $215 million in penalties.
  • 19,600 employees made complaints to the ATO about their unpaid super.


As a business owner, it's crucial to stay informed about your responsibilities in managing your employees' superannuation contributions, including the consequences of not paying employees’ super to the right superfund on time.


Superannuation Guarantee Charge

The Superannuation Guarantee Charge (SGC) is a significant aspect of Australia's superannuation system that you need to understand to ensure compliance and avoid penalties. In this post, we'll delve into the details of the SGC, answering common questions and shedding light on its various aspects.


When Does the Superannuation Guarantee Charge Apply?


The SGC comes into play when you as the employer fail to fulfill your obligation of paying employees' superannuation guarantee (SG) contributions in full, on time, and to the correct super fund. This typically occurs if:


  1. there is a delay in paying the super guarantee amount to the employee’s super fund.
  2. there is a shortfall due to an incorrect calculation of the employee's ordinary time earnings amount on which the super guarantee was calculated.

How is the Superannuation Guarantee Charge Calculated?


Let's take an example to better understand the SGC calculation. Suppose an employee, Sarah, has ordinary time earnings of $5,000 for a quarter, and her employer fails to contribute the required 11% ($550) into her superannuation fund. The SG shortfall amount is $550.


Nominal interest is calculated on the SG shortfall amount, compounded daily at the interest rate of 10%. The interest for a quarter (assuming a 90-day quarter) would be approximately $13.70.


An administration fee of $20 (per quarter) is also includedin the calculation.


Therefore, the total SGC amount would be $550 (SG shortfall)+ $13.70 (interest) + $20 (administration fee) = $583.70.


When Must the Superannuation Guarantee Charge Be Paid?


The due date for SGC payment is one month after the superannuation guarantee due date.  For example, the due date for SG for the quarter 1 July to 30 September is 28 October. The due date for SGC payment will be 28 November. If a due date falls on a weekend or public holiday, you can make the payment and lodge the SGC statement on the next business day.


How is the Superannuation Guarantee Charge Paid?


To pay the SGC, you will need to complete the Superannuation guarantee charge statement and either lodge it electronically or mail it to the Australian Taxation Office (ATO). The ATO will then calculate the SGC amount based on the provided information.


The easiest way to lodge the SGC statement is online via ATO’s business portal. Once you log in on the business portal, go to Lodgements >Reports and forms. Then click on the Super guarantee charge statement link. You will be asked a series of questions. Complete the required information. The SGC calculator will work out if you need to pay the SGC for your employees, as well as the amount you need to pay. In the end, the calculator will electronically lodge your SGC statement with the ATO.


You will need a payment reference number (PRN) to make the SGC payment. If you had to pay SGC previously, then you can use the same PRN. The PRN can be found online on the ATO business portal, on the accounts summary page.  


Consequences of Not Paying the Superannuation Guarantee Charge:


If you fail to lodge and pay SGC on time, the nominal interest will continue to accrue and the administration fee of $20 per employeeper quarter will be applied. The ATO can apply the superannuation guarantee charge of up to 200% of the original SG amount (on top of the original amount).There may be other administrative penalties of up to 75% of the short fall amount.


The ATO can also take legal action to recover the unpaid amounts.


In Summary:


Understanding and fulfilling your responsibilities as an employer when it comes to superannuation contributions is vital to avoid legal troubles and financial repercussions. The Superannuation Guarantee Charge applies when SG contributions are not paid correctly, and its calculation involves various factors like ordinary time earnings, nominal interest, and administration fees. Ensure you meet your payment obligations on time andaccurately to safeguard both your employees' financial well-being and your own business's reputation.