How employers are being caught out by the timing of superannuation guarantee payments.
Employers can generally only claim a deduction for superannuation contributions in the income year in which the contribution is made. Super contributions are made when the payments are received by the superannuation fund.
It’s not uncommon for employers to be caught out by timing problems – thinking that the contribution has been made (and is therefore deductible) at the point the payment is made, rather than when it is received by the super fund’s bank account.
Many forms of electronic transfer however are not guaranteed to be automatic or next day. BPay for example may take up to 2 days, a delay that is often not factored in.
A new practice statement from the ATO highlights the problem created by the use of clearing houses.
There is a specific element of the law that enables payments made to the Government’s Small Business Superannuation Clearing House (SBSCH) to be accepted as contributions when the clearing house receives them, rather than when the trustee of the superannuation fund has received the contribution. The SBSCH is only available to small businesses with 19 or fewer employees, or with an annual aggregated turnover of less than $10 million.
Private clearing houses are treated differently and as such, employers need to allow sufficient time for their superannuation contributions to be received, processed and paid by the clearing house to the superannuation fund, before their SG obligation is discharged. This can be up to two weeks for some clearing houses – it is imperative you check with your clearing house each quarter on processing cut-off times.
Example – received after 30 June
An employer chooses to bring forward superannuation contributions before 30 June in order to claim the tax deduction in that year. A private clearing house was used – and monies paid to clearing house on 24th June. Unfortunately, the five working days was not enough time for the clearing house to receive payment, process the payment, and make payment to each super fund. As a result, the payment was not received by the trustees of each super fund before 30 June, and the deduction wasn’t able to be claimed until the next financial year.
Example – received after Due Date
An employer processes and pays their quarterly superannuation guarantee (SG) payment to the clearing house, allowing five business days before the obligation is due – however this is after the Clearing House cut-off date. As a result, the payment isn’t processed, paid to, and received by, the employees respective superannuation funds’ on or before the Due Dates. Where a SG isn’t received by the due date, you may have to pay super guarantee charge (SGC) – which includes the SG shortfall amounts, interest on those amounts (currently 10%) and an administrative fee per employee – and these payments are not deductible.