Accidentally paid superannuation late for a strata you manage? Here’s how to fix things and cover yourself... without alerting your clients.
If you’ve paid your clients’ superannuation contributions slightly late, there’s an opportunity to resolve the issue efficiently and avoid possibly ATO scrutiny — without your clients being any the wiser. The below article outlines an approach we have seen work well for several clients.
How the Super Guarantee Charge Works:
The ATO enforces strict rules around late superannuation payments. If a super contribution isn’t paid by the due date, the ATO requires a Superannuation Guarantee Charge (SGC) statement to be prepared. This is effectively a 'dob yourself in' form and is required even if the super was subsequently paid only marginally past the due date. The charge includes:
- The unpaid / underpaid superannuation amount (if any);
- A nominal administration fee;
- Interest on the full super amount calculated up to the date the SGC statement is lodged; and
- Disallowance of the payments as a tax deduction.
It's worth paying attention to the third point (Interest). Particularly that the interest applies on a) the full super amount; and b) up to the date the SGC statement is lodged with the ATO (ie: not the date the super was paid). This is intended as an incentive to lodge an SGC statement promptly as an employer can be up for ever increasing interest penalties on an already paid super amount in the event the ATO follows up even years later. We are seeing this occurring more frequently following a period of relative leniency during the Covid19 pandemic.
In ordinary business circumstances, the fourth penalty (disallowed deduction) is the most costly...effectively slogging the employer a penalty equivalent to the late paid amount multiplied by their tax rate. For strata companies though, this is often irrelevant because super payments are not incurred in deriving assessable income under Section 8-1 of the Income Tax Assessment Act 1997 (and therefore weren't tax deductible anyway).
Practical Steps for Strata Managers:
Given the above, we recommend managers adopt the following steps in the event a clients' superannuation obligation is not made on time:
- Pay the original superannuation amount for the quarter using strata funds as soon as possible.
- Prepare and lodge a SGC statement promptly with the ATO to stop further potential interest accruing.
- Pay any interest and shortfall amount directly from their own business.
This approach ensures that:
- Your strata client remains compliant and protected from future ATO queries or audits;
- The strata client's reports show only the superannuation expense (ie: not the interest or other minor penalties); and
- Your client remains unaffected and unaware of the late payment.
Additionally, as the manager, you may be able to claim the payment of the shortfall as a deduction in your own business.
Quick Takes
- Late super payments attract SGC, including interest up to the SGC lodgement date.
- Strata companies rarely lose deductions as they can’t claim super contributions.
- Paying the shortfall yourself keeps clients unaffected and maintains trust.
- Prompt lodgement of a SGC form stops interest from escalating and ensures compliance.
If you require assistance in regards to lodging a super guarantee charge statement for any strata property you manager, please reach out to our admin team.
Links:
- Super Guarantee Charge (SGC) Statement (ATO Link)
The above content is of a general nature and should not be relied upon as professional advice. Ascend encourages readers to seek advice from suitably qualified professionals in relation to their specific circumstances and not to rely solely on the information provided above. Please contact our office for more information.
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