It is easy to get caught out with superannuation, particularly when you are the owner of a business. With so many things to occupy your mind, superannuation may slip from the forefront.
But as a business owner, you must pay the superannuation guarantee for your staff, and you must pay it on time. A failure to pay it on time will mean that you are no longer able to receive a tax deduction for the payment for that financial year.
On top of that, you can face hefty penalties (which you won’t get a tax deduction for either!). Now imagine being five days late on a $10,000 super payment, losing the tax deduction on that payment and then copping a $20,000 penalty as well.
The first thing is to make sure that your super is paid well before the time it is due. This should be a priority payment (a payment that you make before anything else).
As the end of the financial year approaches, it is time to be thinking about the June Super Guarantee payment. You may have until July 28 to make the payment but leaving it until then will not net you a tax deduction until the next financial year. From a tax perspective, this may not be what you want to do (unless you know that in the next year, you will need more tax deductions).
Superannuation also has a few strange rules when it comes to claiming a tax deduction. For employee superannuation, it is critical that it is paid on time. More than that, the money has to actually be in the bank account of the super fund for you to claim a tax deduction.
Unlike other expenses where you can show the money coming out of your bank account, this money needs to be present in your super fund for you to make the claim. If your super guarantee payment hits the bank account of the super fund on June 30th then you can claim a tax deduction for that year. If, however, it hits the bank account on July 1st then the tax deduction is claimed in the financial year after.
Problems arise when you are paying your super through a clearing house, which takes a number of days to clear your payment and get it to the super fund. For example, you may pay the clearing house on the 25th of June, but your super fund does not receive it into their bank account until the 1st of July.
The ATO’s Small Business Superannuation Clearing House usually has some concessions in these instances.
If you want to get a tax deduction for your June Super Guarantee payment, you need to work out with your clearing house the latest day that they can guarantee that the super fund will then receive the payment this financial year. Some of these clearinghouses are quoting that you should be paying as early as the 14th of June.
Finally, with regards to Super Guarantee, remember that the rate increases to 10.5% from 1st July. This rate applies to wages paid on or after July 1st so make sure your payroll system either automatically updates the rate or that you have updated it to reflect the increase.
Employers who fail to meet their Super Guarantee obligations may also be liable for a range of penalties or charges on top of the super guarantee charge.
Paying super is an important part of being an employer. To ensure your business remains compliant, remember to:
- pay the right amount (9.5 per cent) of employee ordinary time earnings until 1 July 2022 (when it will rise to 10.5
- pay on-time
- pay the right way and
- keep records to show you have met your obligations