Superannuation Guarantee (SG) legislation, governing compulsory contributions to employees' super funds by employers, is a complex and often misunderstood area within Australian payroll. Here are three aspects you may not know about:
1. The impact of award and agreement variations
While the Superannuation Guarantee sets a baseline for contributions (currently 11.5% of ordinary time earnings), certain awards and enterprise agreements may stipulate higher rates. This means that some employers must contribute more than the statutory minimum if they operate under specific awards or agreements. Payroll teams must stay vigilant and check these provisions to ensure compliance, as failing to meet the required contribution rates can lead to penalties and back payments.
2. Salary sacrifice and SG obligations
Another area of complexity is the interaction between salary sacrifice arrangements and SG contributions. Under the law, SG contributions should be calculated based on pre-salary sacrifice earnings. This rule is intended to prevent employers from reducing their SG contributions as employees opt to divert part of their salary to super. Misinterpreting this rule could lead to underpayments and compliance issues.
3. Penalties for non-compliance can exceed underpaid contributions
Failing to meet SG obligations results in more than just paying the difference. The Australian Taxation Office (ATO) enforces a Superannuation Guarantee Charge (SGC) on non-complying employers, which includes the underpaid contributions, interest, and an administration fee. Additionally, the charge is non-deductible, increasing the financial impact. For payroll professionals, staying on top of SG compliance is crucial to prevent these substantial penalties and the reputational damage that can accompany them.
Understanding these details about SG legislation helps payroll teams mitigate risk and maintain compliance, illustrating the importance of expert knowledge in the payroll profession.
