The ATO recently released data that reveals more than $1.13 billion in super guarantee charge (SGC) liabilities were raised through superannuation guarantee (SG) disclosures and ATO compliance action during the 2022/23 financial year.

The ATO has recouped and distributed $683.8 million of super entitlements to super funds and individuals which came from the following:

• employee complaints,

• ATO initiated compliance activities, and

• employer voluntary disclosures.

During the 2022/23 financial year, the ATO completed around 14,000 SG audit cases and issued around 134,000 reminders and prompts. In total, these actions raised approximately $685 million in SG liabilities, including penalties. In addition to this, 56,000 employers came forward and voluntarily disclosed $445 million in SG liabilities highlighting increasing employer awareness and a review of their own SG obligations.

An employer may be liable for SGC in the following circumstances:

• they didn’t pay super in full,

• they didn’t pay super on time,

• they didn’t pay super to the correct super fund.

Importantly, the SGC is not tax deductible.

Our experience has been that employers will generally incur errors in paying their SG obligations in the following circumstances:

Incorrect SG treatment of payroll codes

Wage code mapping in payroll systems is a key source of superannuation errors. Payroll teams need to understand what each payroll code means, when to apply the right one and why they might need to set up new ones. 

Superannuation entitlements can vary from employee to employee

Certain categories of workers may be covered by an enterprise agreement that stipulates a different rate of superannuation. In addition, employees may be covered by industrial agreements, contractual entitlements and internal policy decisions which may impact the amount of SG they are entitled to.

SG Treatment of contractors

There’s a common view among employers that contractors who sit outside the payroll system aren’t entitled to superannuation. But it’s simply not the case. The SG legislation provides that SG may be payable when a contractor is paid wholly or principally for their labour. Employers can expect the ATO to increase its focus on payments of super for contractors.

Our recommended approach

We suggest that the best approach to comply with your SG obligations is to stay vigilant. Payroll teams need to ensure that their systems are up to date with the latest and most relevant information about their employee’s SG entitlements.

As a minimum, employers should have processes in place to identify anomalies and errors as part of their quarterly SG reconciliation.

However, our best practice approach would be that employers take a comprehensive approach in meeting their SG obligations by building a robust framework including:

1. proper payroll system configurations,

2. continual training and upskilling of the payroll team, and

3. gaining an understanding of the requirements of each category of worker involved and the SG obligations for each category of worker.

For any queries or support, talk to your adviser or contact the Findex Tax Advisory  team.

Disclaimer:

This document contains general information and is also not intended to constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser.

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.