Sudden Death Nature of SGC Provisions

A recent decision in an Administrative Appeals Tribunal (AAT) case has highlighted the sudden death nature of the Superannuation Guarantee Charge (SGC) provisions.

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The superannuation guarantee (SG) scheme, administered by the ATO, requires employers to provide a minimum level of superannuation support for each of their employees, subject to limited exemptions.  The required percentage of SG contributions for employees is currently 9% and the level of superannuation support provided for each employee is measured quarterly.  To avoid incurring an SG charge liability in a quarter, the SG contributions must be made to a complying superannuation fund within 28 days after the end of the quarter.

Employers who have an SG shortfall are liable to the SGC for the quarter, equivalent to the amount of the shortfall plus an interest component and an administrative charge.  The shortfall component is collected by the Australian Taxation Office (ATO) and redistributed to the complying superannuation fund.

The recent decision in the case of Williams and C of T held that the employers were not entitled to a reduced SGC even though they had still paid the contributions, albeit late and had paid them to the superannuation fund.  The Superannuation Guarantee Administration Act (SGAA) does not provide for any extension of time to make contributions and the Commissioner has no discretion to overlook a failure to pay contributions by the due date.  Therefore, as in Williams case, a double contribution will occur.

The following table summarises employer obligations with regard to paying superannuation contributions to a complying superannuation fund and SGC:

The lessons to be learned from this case are as follows:

• Ensure your system for calculating superannuation contributions is effective and up to date.  This includes identifying employees that become entitled for superannuation contributions during the year such as turning 18 years of age and part time employees that may earn more than $450 per month on occasion.

• If you become liable to the SGC, ensure that it is paid to the ATO and not the complying superannuation fund to avoid double paying superannuation contributions.