Paying your team’s super late might seem like a small oversight, but it can trigger a costly penalty from the Australian Taxation Office (ATO) called the Super Guarantee Charge, or SGC.
This isn’t just the super you missed paying; the SGC is a bigger sum that includes the super shortfall, 10% annual interest, and an administration fee for each affected employee. The real kicker? Unlike your regular super contributions, the SGC is not tax-deductible, meaning it comes straight out of your profits.
Hereโs what every small business owner needs to know about the SGC to avoid this expensive mistake before Payday Super changes the landscape.
What is the Super Guarantee Charge (SGC)?
The Super Guarantee Charge, or SGC, is a penalty you have to pay if you don’t meet your super obligations for your employees. Itโs more than just a late fee; itโs a charge designed to make sure employers pay the right amount of super, to the right fund, and on time. As an employer, it’s your legal responsibility to help your team build their retirement savings by making regular contributions to their super funds.
You become liable for the SGC if you:
- Pay super contributions late.
- Don’t pay the full super amount owed.
- Pay the super contribution to the wrong fund.
This charge is paid directly to the Australian Taxation Office (ATO), not to your employee’s super fund. A crucial point to remember is that while your regular, on-time super contributions are tax-deductible, the SGC is not. This means any SGC payment comes directly out of your business profits, making it a significant and unnecessary cost.
How much is the SGC?
The SGC is always more than the super you originally missed. It’s a combination of the super shortfall, interest on that amount, and an administration fee, all designed to compensate your employee for the lost earnings their super would have generated.
The SGC is made up of three main parts:
- The SG Shortfall. This is the amount of super you underpaid or failed to pay.
- Nominal Interest. This is an interest charge of 10% per year that applies to the shortfall amount.
- An Administration Fee. This is a fee of $20 per employee, per quarter, to cover the ATO’s costs of administering the charge.
In some cases, there might also be a “choice liability” if you didn’t give your employees a choice of super fund or paid their contributions into the wrong account.
How is the SGC calculated?
Understanding how the SGC is calculated is key to appreciating why it’s so important to avoid. One of the biggest mistakes business owners make is assuming the shortfall is based on an employee’s Ordinary Time Earnings (OTE), which is what you use for regular super payments.
For the SGC, the shortfall is calculated on an employee’s total salary and wages, which is a broader definition that includes payments like overtime and some allowances. This means the base amount for the SGC calculation is often higher than the OTE you normally use, leading to a larger penalty.
Let’s break it down with an example.
Say you have a small business with three employees. For the quarter from 1 July to 30 September, their total salary and wages (including some overtime) were $18,000 each. The super guarantee rate is 12%. You accidentally miss the super payment deadline of 28 October. You realise your mistake and lodge an SGC statement on 28 November.
Hereโs how the SGC would be calculated:
Step 1: Calculate the SG shortfall
- This is based on total salary and wages, not OTE.
- Total salary and wages for the quarter = 3 employees x $18,000 = $54,000
- SG Shortfall = $54,000 x 12% = $6,480
Step 2: Calculate the nominal interest
- Interest is charged at 10% per annum and accrues from the start of the quarter (1 July) to the date you lodge your SGC statement (28 November).
- Let’s say the interest for this period comes to $270.
Step 3: Calculate the administration fee
- This is $20 per employee, for the quarter you missed.
- Admin Fee = 3 employees x $20 = $60
Step 4: Calculate the Total SGC Payable
- Total SGC = SG Shortfall + Nominal Interest + Admin Fee
- Total SGC = $6,480 + $270 + $60 = $6,810
In this scenario, the initial missed super payment of $6,480 has turned into a $6,810 non-tax-deductible charge. This is a significant extra cost for a small business that could have been avoided.
When are super payments and SGC payments due?
Staying on top of your payment deadlines is one of the easiest ways to avoid the SGC. By law, you must pay super for eligible employees at least four times a year.
Here are the quarterly super due dates you need to know:
| SG Quarter | Super Payment Due Date | SGC Statement Due Date |
| 1 July โ 30 September | 28 October | 28 November |
| 1 October โ 31 December | 28 January | 28 February |
| 1 January โ 31 March | 28 April | 28 May |
| 1 April โ 30 June | 28 July | 28 August |
If you miss the super payment due date for a quarter, you must lodge an SGC statement and pay the charge by the SGC due date, which is one calendar month later.
How is the SGC paid to the ATO?
If you find you’ve missed a payment, you need to report it to the ATO yourself. The process involves lodging a Superannuation Guarantee Charge statement. This statement requires you to calculate the SGC you owe for each employee for the quarter you missed.
You’ll need to gather details for the statement, including:
- The employee’s name and tax file number.
- The period of the missed payment.
- The amount of superannuation owed.
Once you complete the statement, you can lodge it with the ATO through their online services portal or by mail. After you’ve lodged the statement, you’ll need to pay the calculated SGC amount to the ATO. The ATO will then distribute the shortfall and interest components to your employees’ respective super funds.
What are some tips to avoid being charged SGC?
The best way to deal with the SGC is to avoid it altogether. Here are five practical tips to help you stay on track with your super obligations.
1. Pay super more frequently
Instead of waiting for the quarterly deadline, consider paying super fortnightly or monthly, at the same time you run payroll. This helps with cash flow, as you’re making smaller, regular payments, and it gives you plenty of time to fix any issues before the final due date.
2. Check details for new employees
When a new employee starts, make a small super contribution after their first pay run. This is a simple way to test that you have their correct super fund details and that everything is set up properly, avoiding the risk of paying into the wrong account.
3. Act fast if you miss a payment
Mistakes can happen. If you realise you’ve missed a payment, don’t delay. Lodge your SGC statement and pay the charge as quickly as you can. The nominal interest keeps growing until you lodge the statement, so acting fast will minimise the financial hit and help you avoid extra penalties for being late.
4. Factor in clearing house processing times
Remember that super contributions are only considered “paid” when the super fund receives them, not when you send the money from your bank account. Some clearing houses can take up to 14 days to process payments, so plan ahead and make your contributions well before the deadline to be safe.
5. Use a reliable payroll system
A secure and efficient payroll software can make managing super payments much easier. Using an employer payment portal or a clearing house helps streamline the process and ensures your payments are managed correctly.
What happens if you don’t pay the SGC?
Ignoring your SGC obligations is a serious mistake that can lead to even bigger financial consequences. If you fail to lodge an SGC statement and pay the charge on time, the penalties can escalate quickly.
- Growing interest: The 10% nominal interest will continue to accumulate on the outstanding shortfall amount.
- Additional penalties: The ATO can impose further administrative fines, which can be as high as 200% of the original SGC amount.
- Legal action: In serious cases, the ATO can take legal action against you or your business to recover the unpaid super owed to your employees.
What factors typically cause issues with super?
Even with the best intentions, a few common issues can trip up employers and lead to an SGC liability.
- Super guarantee shortfall: This often happens due to simple miscalculations. It’s important to double-check your figures each quarter and stay up-to-date with the current SG rate to make sure you’re paying the correct amount.
- Paying into the wrong super fund: This is a surprisingly common problem. It can happen if an employee gives you incorrect details when they start, or if their super fund merges with another one. Even if you’ve paid the right amount on time, sending it to the wrong fund means you haven’t met your obligation, and you could be liable for the SGC.
Keep your payroll updated and compliant
Struggling to keep up with ATO requirements like the Super Guarantee Charge? Payroll compliance can feel overwhelming, but it’s a critical part of running your business.
Payroller is designed to make these processes simple. Our software automates tax and super calculations, so you can stay compliant and error-free with every pay run. Instead of spending hours worrying about payroll mistakes, you can pay your team in minutes and get back to focusing on what you do bestโgrowing your business. Let’s simplify payroll, together.