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A. What to consider as an employer

Key features of the SG system

Section: 1.2

1.2 Key features of the SG system

Key features of the SG system 

  • 10%* of ordinary time earnings (OTE) must be contributed for eligible employees up to a maximum contributions base
  • Contributions must be made to a complying superannuation fund
  • Employer contributions must be received by the superannuation fund no later than 28 days after the end of the quarter
  • Contributions are tax-deductible to the employer (unless they are not made within the required time frame, in which case penalties apply including that the tax deduction is disallowed).

*The Super Guarantee rate increased from 9.5% to 10% on 1 July 2021

What happens if an employer does not make the required SG payments?

Failure to make correct on-time payments can result in an SG shortfall. The consequences of this can include the following:

  • Loss of tax deductibility for superannuation contributions.
  • Shortfall percentage applied against salary and wages (rather than OTE) which generally includes a far greater range of remuneration amounts paid to employees. For example, overtime payments do not generally constitute OTE but are included in salary and wages.
  • A range of penalties and interest which can include a penalty of up to 200% of the shortfall amount.
  • Administration fees of $20 per employee per quarter of shortfall.
  • Company directors can be held personally liable

Streamlining of the superannuation payments system 

In 2011 it became compulsory for all employers to be SuperStream compliant.  SuperStream is the process businesses must use to pay employee SG contributions to superannuation funds. Data and funds are both sent electronically via a clearinghouse that can manage SuperStream compliant superannuation payments. These are called small business superannuation clearing houses (SBSCH). The effect of this was that superannuation contributions were sent to the ATO and then directed to superannuation funds. Prior to SuperStream, employers sent their employees' SG contributions directly to the funds by cheque or electronic payment. Hence SuperStream centralised the SG payment system and enhanced the ability of the ATO to monitor payments and shortfalls.

Employers need to register with a small business superannuation clearing house (SBSCH) to make all their superannuation contributions in a single transaction, even if employee contributions were going to multiple super funds.  There were a number of clearinghouses available for employers to register with, including those established by the various superannuation funds and the small business superannuation clearing house set up by the Australian Taxation Office.

From 19 February 2018 employers were longer be able to access the ATO's current small business superannuation clearinghouse. The ATO's Small Business Superannuation Clearing House joined the ATO's online services. This streamlined the process by allowing employers access to tax and superannuation with just one login.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements. 

Last modified: Monday, June 7, 2021