Understanding Superannuation Guarantees for Australian Small Business Owners

As a small business owner in Australia, it’s crucial to stay informed about superannuation guarantee (SG) obligations. Recent data from the Australian Taxation Office (ATO) reveals that workers are owed over $3.6 billion in SG, a figure the government and regulators aim to reduce.

The Current State of SG Compliance

While 94% of SG, amounting to over $71 billion, was collected in 2020-21 without regulatory intervention, there’s still a gap. The SG gap decreased from 5.7% in 2015-16 to 5.1% in 2020-21, partly due to COVID-19 stimulus measures. However, this 5.1% represents a significant $3.6 billion that should be in workers’ superannuation funds. A portion of this includes $1.8 billion from hidden wages, like off-the-books payments.

As of February 2022, there’s also $1.1 billion in SG debt linked to insolvency, which is unlikely to be recovered. This highlights the need for timely and accurate SG payments.

The Role of Technology and Legislative Change

The government is changing its approach to SG underpayments. Instead of traditional compliance programs, technology and legislative changes will play a bigger role.

Single Touch Payroll and SG Compliance

The Single Touch Payroll (STP) system is crucial here. Employers use STP to report worker payments, and the ATO matches this data with super fund reports. This helps identify late or incorrect SG contributions. Remember, SG must be received by the employee’s fund before the due date. Payments on the due date are often too late, and there’s no tolerance for delays.

Consequences of Late SG Payments

If SG contributions are late, employers must pay the SG charge (SGC) and lodge a Superannuation Guarantee Statement within a month. The SGC includes the SG shortfall, 10% annual interest, and a $20 administration fee per employee, per quarter. Crucially, SGC amounts are not tax-deductible.

Also, the SGC calculation is based on the employee’s salary or wages, not their ordinary time earnings. This can increase the amount owed, especially if you have workers earning overtime.

Misclassifying Contractors

Misclassifying workers as contractors can lead to significant penalties. It’s important to understand that even genuine contractors might be treated as employees for SG purposes. Characteristics of a genuine contractor include autonomous decision-making, financial self-reliance, and seeking profit rather than just payment for time and effort.

Upcoming Changes: ‘Payday’ Super from 1 July 2026

The government plans to require employers to pay SG at the same time as wages from 1 July 2026. This aims to improve retirement outcomes for employees and reduce SG liability risks for employers.

It’s essential for you, as a small business owner, to be vigilant about your SG obligations. Stay informed about changes and ensure your payroll systems are compliant. This not only benefits your employees but also safeguards your business from potential financial and legal repercussions.