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Will reform make SGC fairer?

September 2015 

SMEs who are late in making super contributions on behalf of their employees risk considerable penalties however new legislation is simplifying the way they are calculated.


Exposure draft legislation released by Treasury will simplify the superannuation guarantee charge (SGC) by aligning it with ordinary time earnings.

Under current legislation, if an employer is late in paying quarterly superannuation contributions for their employees, they face considerable costs to bring their compliance up-to-date. 

For example, the super contributions are non-deductible and then interest and administrative charges apply. This can have a substantial financial and tax impact on small businesses while also being quite complex to calculate. Another example is that there is generally no Superannuation required to be paid on overtime, but if you are late and have to pay SGC, you will also have to pay the SGC on the overtime as well.

The proposed changes will simplify the calculation of SGC by aligning the earnings base (i.e., salary and wages) with the earnings base used when calculating normal SG contributions (i.e. ordinary time earnings).

The proposed changes also align the interest component with the period contributions are outstanding (i.e., from the 29th day following the end of the relevant quarter instead of from the first day of that quarter) and remove the additional penalties imposed under the Superannuation Guarantee (Administration) Act 1992. 

In its place, the additional SGC penalty is replaced by the general administrative penalties that apply under the Tax Administration Act 1953.

The reforms to SGC were recommended by the Board of Taxation's review into impediments faced by small business with exposure draft legislation released in January.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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