The minimum super an employer must pay each quarter for each eligible employee is called the super guarantee (SG).
Currently the SG is 9.5% of an employee’s ordinary time earnings (OTE).
OTE is usually the amount an employee earns for their ordinary hours of work and includes commissions, shift loadings and allowances, but not overtime payments.
To calculate the required superannuation contributions that must be paid, multiply the employee’s OTE for the quarter by the 9.5% SG rate (or the percentage used if paying superannuation contributions at a higher rate).
Super guarantee (SG) contributions must be paid to complying superannuation funds or retirement savings accounts (RSAs) by the quarterly due dates, which are 28 days after the end of each quarter.
Some superannuation funds require employers to make contributions monthly. When an employer registers with a superannuation fund with this requirement, the employer is agreeing to make monthly contributions to that fund.
All employers need to pay and report superannuation contributions electronically to comply with SuperStream and Single Touch Payroll requirements.
Director’s Personal Liability for Company Debts
Recent law changes will now make directors of companies liable for the entire unpaid and unreported superannuation guarantee charge (SGC) in relation to a company’s unpaid superannuation guarantee (SGC) contributions. Companies must satisfy new timeframes for reporting their superannuation guarantee liabilities to the Australian Taxation Office (ATO). The new law applies from 1 April 2019.
An extension of time to pay is available on request in writing to the ATO but an explanation of the reasons why the extension is needed must be given.
The New Law’s Implications
The new law allows the ATO to pursue criminal penalties for serious breaches of employer superannuation guarantee obligations, including potential imprisonment for individual employers or directors of
companies (including trustee companies) that have employees.
The previous law allowed only for collection of financial penalties (including the superannuation guarantee charge and interest).
The new procedure is as follows:
The Commissioner sends a written direction to an employer to pay any outstanding SGC amounts.
The direction contains certain details, including the requirement that the superannuation liability is satisfied within 21 days after the direction is given to pay the liability.
The Commissioner is empowered to seek court-ordered penalties if an employer fails to comply with the direction within the specified time.
The penalties can only be waived if a director of a company can demonstrate that all the necessary steps to comply with the Commissioner’s direction(s) have been taken.
The new law applies retrospectively to all outstanding superannuation guarantee charge liabilities that were payable from 1 July 2018.
‘Locked Down’ Rule
Previously, a director could be personally responsible for the company’s unpaid and overdue superannuation guarantee charge and Pay As You Go Withholding (PAYG(W)) liabilities, but personal liability could be avoided by liquidating the company before the liabilities were “locked down”.
Under the previous law, directors were able to avoid the liabilities by liquidating the company within the 21-day liability notice period and within three-months of the due date for the payment of the company’s SGC liability. The director’s liability was “locked down” once the three-month period had passed – then, the liability could not be waived. Therefore, by waiting until the “lock down” date and winding up the company just before this date (or alternatively – placing the company under administration just before that date), director’s obligations in relation to the payment of the company’s taxes and directors’ penalties were avoided.
Under the new law, a director’s liability for unpaid SGC liabilities is “locked down” immediately after these liabilities are incurred (which effectively means – 3 months earlier than under the previous law). Therefore, directors cannot avoid personal liability for the unpaid SGC liabilities by simply appointing an administrator or liquidator to the company. The new law does not affect the 3-month rule applicable to PAYG(W) liabilities.