What happens when you pay super late?

This article can basically be summed up with “ALWAYS PAY SUPER ON TIME!”

Why?

The penalties for not paying super are massive. It’s just most owners don’t realise what they are until it’s too late. 

Firstly, what is ‘on time’ – its paying super to your staff super funds by the 28th day after the end of the quarter. So, if someone accrued super of $20 in April it would be due by the 28th of July and so on and so forth. If you are using a software such as the Xero or MYOB clearing house, it needs to be paid by the 21st of the next month. 

Now, the important thing to keep in mind is that the super must hit their account by that day, so even if you pay the day before it might take 2-3 days to reach the account meaning – You just paid the super late…

What is the punishment for paying super late then?

Firstly, it means that super is not tax deductible. This is the most overlooked of the penalties because if your profitable rate and your tax rate is 25% the super bill effectively goes up by 25% or if your tax rate is 30%, then it is 30%. If your super bill is $50,000 a year this could mean an extra $12,500 in income tax you’re paying. That is a massive burden on your business.

Secondly, it means you must lodge SGC statements with the ATO if you paid late, which they charge penalties, administration fees per employee per month and interest. Even if you do have a good reason for the late payment, the ATO almost never remits penalties and interest on SGC Debts. As a result, many businesses chose to sweep it under the rug, which can cause even worse issues at a later time.

The important thing to note with the interest is that it accrues from the moment you lodge the SGC statement and pay the debt. That doesn’t sound too bad but think about this – let’s say you’re a day late on superannuation 2 years ago and the ATO finds out or you prepare an SGC statement. Even though you paid it a week late two years ago interest will accrue for that entire two-year period.

That brings us to the next thing to note. If you fail to pay Super and you are caught, you can be charged up to 200% of the SGC amount. So, if you didn’t pay $10,000 of super, you can be charged an administrative penalty of $20,000 plus the interest, plus the other penalties, plus it not being tax deductible.

If you need help, its best to get on the front foot with this issue and as said at the start “ALWAYS PAY SUPER ON TIME!”

If you have any questions, you can book a phone meeting here or contact us using the form below.

– Team BKSP