With the next quarterly payment due after the public holiday weekend on 28 January, Pilot Partners tax specialist Murray Howlett has urged employers to pay their employees’ superannuation before they go on holiday, to avoid incurring interest rate fees on late payments.
Mr Howlett explained that employers who fail to meet their superannuation duties ahead of the public holiday risk being slapped with hefty interest bills for late payments.
According to the tax strategist, the Single Touch Payroll (STP) system was catching many people unawares with debts of up to $40,000 for payments anywhere from one to four days late.
“Last year, we saw many clients who were caught out by the new data-matching system over the Australia Day long weekend,” Mr Howlett said.
“We expect that number to increase significantly now that the Single Touch Payroll system has been expanded to cover all employers.
“We need to send a strong message to employers before they go on holidays that they need to manage their payroll and bring forward their superannuation guarantee payment date three or four days earlier to give themselves room for error.”
Late payments can result in a superannuation guarantee charge (SGC), which is calculated on the employee’s salary and includes an additional 10 per cent interest fee on the amount.
Mr Howlett explained that under the current law, the interest debt accrues until the employer lodges an SGC form.
“There is no doubt the penalty is disproportionate to the crime,” Mr Howlett said.
“Even though you may pay superannuation to your employees one day late, the problem isn’t fixed. If you’re late, you not only have to pay the late super, but you also need to lodge the superannuation guarantee charge (SGC) form, otherwise interest will continue to accrue.”
Mr Howlett said any company director was also personally liable for the interest debt and should be aware of the ramifications.
“The director of a company who fails to meet a superannuation guarantee charge (SGC) liability in full by the due date automatically becomes personally liable for a penalty equal to the unpaid amount,” Mr Howlett said.
“Superannuation penalties are a big one and directors need to know that they can be personally liable for penalties and interest for not paying the super on time.”